This week, along with the US financial instability concerns, the US debt ceiling issue has been in the spotlight. According to the latest reports, the meeting between President Biden and Republican House Speaker McCarthy, which was scheduled for the 11th to 12th, has been postponed to next week. It is reported that an agreement is expected to be reached early next week, so today’s market is likely to be in a holding pattern.
Since the second half of the NY market yesterday, the foreign exchange market has been lacking clear direction. Although the dollar-yen and yen crosses have been relatively stable, there is not much willingness to take risks, especially considering the previous day’s decline in US stocks. The market is waiting for news related to the US debt ceiling issue, and it is expected to continue as a wait-and-see market.
Economic indicators to be announced in the upcoming foreign markets include Hong Kong’s real GDP (final) for Q1 2023, India’s industrial production index for March, India’s consumer price index (CPI) for April, US import price index for April, and the University of Michigan’s preliminary consumer sentiment index for May. The one-year inflation rate expected to be announced in the University of Michigan’s consumer sentiment index is 4.4%, which is expected to decrease from the previous 4.6%. However, regarding the trend of inflation slowdown, this week’s US consumer price index and producer price index have already been confirmed, and the market has likely priced in these factors.
On the surface, there seems to be a lot of news favoring selling the USD, but the market this week is not proceeding as smoothly. Despite signs of inflation being contained in both US CPI and PPI, there has been strong buying pressure on the USD.
In such cases, it is advisable to not react too much to the news and instead focus on technical analysis to capture the range-bound market. This approach is more likely to yield favorable results.