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Home ANALYSIS

The EUR is the strongest and the CHF is the weakest as NA traders enter for the day

A.R Chowdhury by A.R Chowdhury
March 29, 2022
Reading Time: 9 mins read
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The EUR is the strongest and the CHF is the weakest as NA traders enter for the day

Forex

The strongest to weakest of the major currencies

The EUR is the strongest and the CHF is the runaway weakest of the major currencies as the North American session begins. The USD is weaker as flow of funds heads out of the safety of the US dollar – and other currencies like CHF and JPY – and into the European currencies.

The moves are being helped by hopes for a peace agreement in Ukraine. Russia calls Ukraine talks constructive. That has stocks higher and also yields moving to the upside. Oil is trading lower. OPEC meets this week and is expected to keep the 400K BPD increase plan intact although there is question if production goals can be met. There is storm damage to the Capsian Pipeline Consortium that will likely limit Russian oil exports. There is also the question of weaning off Russian oil going forward. On the negative side, Shanghai rolling Covid lockdown remains a concern, and peace is still better than war.

In the US, the JOLTS job openings for February will be released at 10 AM along with consumer confidence for March. The consumer confidence is a more timely economic report. Included in the report is the present and expectations indices. The present situation remains well above the future expectations. Consumer confidence is expected to fall to 107.0 from 110.5 last month. Last month the present situation index moved up to 145.1 from 144.5. The expectations index meanwhile decline to 87.5 from 88.8 as  inflation 
Inflation

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
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concerns way on consumer’s expectations.

At 9 AM, the S&P Case Shiller home price index for January will also be released

A look around the markets is showing:

  • Spot  gold 
    Gold

    Gold is the most widely traded and important commodity. Prized for its historical importance and used for trading an exchange of goods, the gold market today is estimated at nearly $2.4 trillion.The value of gold fluctuates constantly, as it trades on public exchanges where it has a price that is determined by supply and demand. Gold has historically had tremendous significance and even today is extremely sought after. Gold has been used as a currency as it doesn’t corrode, and the material allows for some absorption of light creating a yellow glow, which lends the name yellow metal.Ultimately, institutional and retail investors buy and sell gold contracts or physical gold, thus creating the demand and supply flow.This can be pure speculation, to acquire or distribute physical gold, or as a hedge for commercial application. For day-traders, the purpose of trading gold is to profit from its daily price movements.How to Trade GoldDay-trading gold is speculating on its short-term price movements. Of note, physical gold is not actually handled or taken possession of, rather the transactions take place electronically and only profits or losses are reflected in the trading account.There are a number of ways to ultimately trade gold. Retail brokers typically offer exposure to gold through contracts-for-difference (CFDs).Beyond retail brokers, the main way to trade gold is via a futures contract. This represents an agreement to buy or sell something, i.e. gold at a future date. Buying a gold futures contract doesn’t mean you actually have to take possession of the physical commodity.Day traders close out all contracts (trades) each day and make a profit based on the difference between the price they bought the contract and the price they sold it at. However, on a futures exchange, gold moves in $0.10 increments only. This increment is known as a tick. It is the smallest movement a futures contract can make. If you buy or sell a futures contract, how many ticks the price moves away from your entry price determines your profit or loss.

    Gold is the most widely traded and important commodity. Prized for its historical importance and used for trading an exchange of goods, the gold market today is estimated at nearly $2.4 trillion.The value of gold fluctuates constantly, as it trades on public exchanges where it has a price that is determined by supply and demand. Gold has historically had tremendous significance and even today is extremely sought after. Gold has been used as a currency as it doesn’t corrode, and the material allows for some absorption of light creating a yellow glow, which lends the name yellow metal.Ultimately, institutional and retail investors buy and sell gold contracts or physical gold, thus creating the demand and supply flow.This can be pure speculation, to acquire or distribute physical gold, or as a hedge for commercial application. For day-traders, the purpose of trading gold is to profit from its daily price movements.How to Trade GoldDay-trading gold is speculating on its short-term price movements. Of note, physical gold is not actually handled or taken possession of, rather the transactions take place electronically and only profits or losses are reflected in the trading account.There are a number of ways to ultimately trade gold. Retail brokers typically offer exposure to gold through contracts-for-difference (CFDs).Beyond retail brokers, the main way to trade gold is via a futures contract. This represents an agreement to buy or sell something, i.e. gold at a future date. Buying a gold futures contract doesn’t mean you actually have to take possession of the physical commodity.Day traders close out all contracts (trades) each day and make a profit based on the difference between the price they bought the contract and the price they sold it at. However, on a futures exchange, gold moves in $0.10 increments only. This increment is known as a tick. It is the smallest movement a futures contract can make. If you buy or sell a futures contract, how many ticks the price moves away from your entry price determines your profit or loss.
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    is trading down $-15.12 or -0.79% at $1906.75
  • Spot silver is down $-0.42 or -1.72% at $24.40
  • Crude oil is trading down -$4.40 at $101.32
  • Bitcoin is trading higher $48,015. That is near the high price for the day $48,062. The low price was down at $47,082

US stocks are trading higher as result of the hope for peace news.

  • Dow industrial average is up 202 points after yesterday’s 94.65 point gain
  • S&P is up up 25.5 points after yesterday’s at 32.46 point rise
  • NASDAQ is up 107 points after yesterday’s 185.6 point gain

The European equity markets, the major indices are mixed:

  • German DAX, +2.8%
  • France’s CAC, +3.1%
  • UK’s FTSE 100 +1.4%
  • Spain’s Ibex +2.5%
  • Italy’s FTSE MIB +2.6%

IN the US debt market, the focus is back on the Fed as a peace agreement may push growth back higher with inflation in its wake still lingering and potentially growing.

US yields

US yields are moving higher.

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IN the European debt market, their yields are also on an upward trajectory today:

European yields

European benchmark 10 year yields are up sharply in Europe
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A.R Chowdhury

A.R Chowdhury

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