Morning Market Review
EURUSD
The European currency shows a weak corrective growth after a sharp decline in the last five trading sessions. The day before, the EUR/USD pair also traded mainly with downward dynamics and managed to update record lows, approaching the level of 0.9550. Investors are alarmed by the current market developments, which clearly indicate a sharp slowdown in the eurozone economy. Together with similar processes in China and the US, this could lead to a slowdown in the entire global economy. World central banks are actively tightening monetary policy in an attempt to reduce inflation. In particular, another major increase in interest rates from the US Federal Reserve is expected before the end of the year, and the Bank of England, for example, may carry out an unplanned correction of the rate against the backdrop of a record collapse in the national currency. The macroeconomic statistics released yesterday in Germany put additional pressure on the euro positions. IFO Business Climate indicator fell from 88.5 points to 84.3 points, while the forecast was at 87.1 points. In turn, the Current Assessment indicator corrected in September from 97.5 points to 94.5 points, which turned out to be worse than the expected reduction to 96.0 points, and the Economic Expectations index fell from 80.5 points to 75.2 points, although analysts were counting on 78.6 points.
GBPUSD
The British pound is in an upward correction, recovering from a sharp collapse the day before, which led to new record lows. The GBP/USD pair is testing 1.0770 for a breakout, although yesterday the quotes fell below 1.0280. Investors are concerned about the plans of the UK government to carry out a series of active reforms aimed at supporting the country's economy. In particular, earlier the UK Chancellor of the Exchequer, Kwasi Kwarteng, presented in Parliament a support plan worth 60.0 billion pounds, which, among other things, provides for the abolition of the increase in income tax for large enterprises from 19% to 25%. It is also reported that the maximum income tax rate in the country will be abolished. Earlier, the new British Prime Minister Liz Truss also presented her proposals to support the economy, advocating subsidizing electricity and heating bills for businesses and households for the next six months.
AUDUSD
The Australian dollar shows a subdued increase, recovering from a sharp decline over the past two trading days. The AUD/USD pair is preparing to test 0.6500 for a breakout, having won back about half of the losses at the beginning of the current week. At the same time, the demand for the US dollar remains high, as the risks of a slowdown in the global economy increase. Statistics on business activity in the EU and the UK greatly disappointed investors, and the pound dives to record lows on the back of news about measures to support the economy from the new government. In turn, it is worth noting that the statistics on business activity in Australia released last week turned out to be quite positive and managed to support the cautious optimism of Australian dollar buyers. S&P Global Manufacturing PMI rose from 53.8 to 53.9 in September, while Commonwealth Bank's Services PMI rose from 50.2 points to 50.4 points, while forecasts suggested a decrease to 47.7 points.
USDJPY
The US dollar is trading with multidirectional dynamics, consolidating near the level of 144.50. Corrective sentiment prevails in the market after the increase of the US currency in the last two trading days. Meanwhile, moderate support for the yen at the beginning of the week is provided by relatively optimistic macroeconomic data from Japan. Jibun Bank Services PMI in September rose from 49.5 points to 51.9 points, while forecasts suggested a decline to 49.3 points. In turn, Jibun Bank Manufacturing PMI fell from 51.5 points to 51.0 points, but still remains above the 50.0 point level, which separates growth from decline. Investors are focused on macroeconomic statistics from the US today. It is expected that the dynamics of Durable Goods Orders in August will decrease by 1.1% after a decrease of 0.1%, and the indicator, excluding Defense orders and Transportation, will show near-zero dynamics. In turn, noteworthy data from Japan will appear on Wednesday, when the minutes of the meeting of the Bank of Japan will be published.
XAUUSD
Gold prices show a slight increase, retreating from their April 2020 record lows, updated the day before, and trying to consolidate above 1630.00 amid increasing uncertainty about the global economic outlook. The pressure on the XAU/USD pair remains, as the market expects further tightening of monetary policy by global financial regulators. In particular, the US Federal Reserve may go for at least one more major interest rate hike before the end of the year. In turn, the Bank of England may hold an emergency meeting in order to correct the rate, although it was previously noted that the regulator plans to take a wait-and-see position until November. In turn, the demand for gold is supported by the prospects for an escalation of the military conflict between Ukraine and Russia, which could lead to increased anti-Russian sanctions.