The world currency market is in a fever again in July. Ukrainians often simply do not have time to respond to what is happening in time.
Why the euro is jumping again
More recently (in early and mid-June), the euro / dollar was in a relatively stable ratio – about the level of 1.07-1.09 dollars per euro, and on the Ukrainian cash market, the average quotes of the euro currency ranged from 39.6 to 41 ,10 hryvnia. The non-cash euro on the interbank market was also in a relatively predictable corridor.
But everything has changed dramatically in recent days, and before the end of the month we are waiting for new currency rallies.
A pair of euro / dollar on the evening of July 19:
The behavior of the euro currency on the Ukrainian interbank market on the evening of July 19:
Euro cash rate in Ukraine on the evening of July 19:
The first harbinger of the next currency cataclysms was the rapid rise of the euro/dollar quotes above the psychological threshold of $1.12 per euro last week.
The reason for this behavior of the pair was a change in the mood of investors and speculators regarding the prospects for a global recession – especially in the US, Europe and China.
The pessimism that reigned until now regarding the prospects of the American economy suddenly gave way to optimism, which supported the euro currency. It would seem that good data on the labor market and consumer sentiment in the US should have strengthened the dollar, but everything happened exactly the opposite.
For a long time, the market was afraid of the long-term consolidation of inflation in America at high levels and a protracted recession. But the indicators of US consumer prices have finally begun to react to the actions of the Fed: it is now obvious that they are moving quite quickly towards the target of 2% per annum.
And this means that the Fed will not need to tighten monetary policy as much as analysts previously predicted, and that a “soft landing” is still possible.
This was indirectly confirmed by US Treasury Secretary Janet Yellen. Against the backdrop of a slowdown in China’s GDP growth and problems in Europe, she confidently says that, even with negative news from China and the EU, America is not in danger of a significant decline. This means that there is no particular reason for the Fed to rush with a new increase in interest rates at a meeting on July 26.
On the other hand, negative signals from China and a weak economic recovery in Germany (the main locomotive of the EU), against the backdrop of persistently high inflation in Europe, are likely to force the ECB to raise its key rate again at the next meeting on July 27.
The change of negative expectations to optimistic ones pushed up the US stock indices and led to a decrease in the yield of treasuries. Here, for example, is the data for the evening of July 18 this year:
In this situation, ideal conditions are again emerging for a new rally in the euro / dollar pair in the coming days, lasting at least until July 28. By this time, the steps of the Fed will already be known (the meeting will be held on July 26), and the response of the European regulator (decisions will be announced in the evening of July 27).
Added fuel to the fire and the analytical report of the Bundesbank. It says that in the second quarter, German GDP grew slightly after a technical recession at the turn of 2022 and 2023. However, further recovery is likely to be weaker than expected in June analysts’ forecasts.
In this scenario, the US economy looks healthier in comparison to the EU economy, which is likely to force the ECB to work harder on at least one or two more interest rate hikes. This is what speculators want to earn now.
Golden time for speculators
The effect of close speculative interest in the euro will be short-term – even now the level of $1.12 looks “overheated”.
In my opinion, after the next meetings of the American and European regulators, a new period of pair correction awaits us. Moreover, according to my forecasts, the Fed will again pause the growth of interest rates and keep the key rate at 5.25% per annum. But the European Central Bank will risk again and raise its key rate by 0.25% per annum – up to 4.25% per annum. This is what speculators who are betting on the euro currency are now expecting from him.
At the peak of “passions” on the decisions of the regulators, I do not exclude an additional rise in the euro against the dollar to levels of 1.135. This will lead to an increase in sales quotations on our interbank market for non-cash euros to maximum levels of about 41.92 hryvnia per euro, and in the cash market – to peak values of the cash euro selling rate in exchangers up to 42.10 hryvnias and more.
But then, in the first half of August, the euro/dollar quotes will enter a period of correction with a gradual return to the corridor from 1.095 to 1.11 dollars per euro. The traditional holiday season in the USA and Europe will also work during this period.
This should be taken into account by our citizens and businesses, which, for various reasons, are now “tied” to the euro.
The degree of investors’ nervous tension is clearly seen in the behavior of the gold market, where the value of the “yellow” metal began to grow quite rapidly after a short period of subsidence. And it has almost reached the levels of the end of May this year.
Gold chart for the evening of July 19:
This suggests that some of the most conservative investors are already hedging their risks in advance before the inevitable period of exchange rate turbulence for the EUR/USD pair and are moving into gold. This is what raises his quotes now.
How much will the euro cost in Ukraine
Traditionally, all jumps in the euro/dollar pair on external markets will be reflected in the Ukrainian currency market, taking into account its current specifics.
On the interbank market, while maintaining the NBU corridor for the non-cash dollar 36.5686 – 36.9343 hryvnia, the corridor for the non-cash euro will be in the range from 40.44 to 41.92 hryvnia.
In the cash market, during periods of maximum strengthening of currency rallies on world markets, our banks and owners of exchange offices networks will prefer not to take risks and widen the spread for buying/selling the euro currency in order to shift their risks to buyers and sellers of the euro.
According to my forecasts, the biggest volatility in the euro will be observed from 24 to 28 July. To minimize their risks, the owners of exchangers these days will set a spread for the euro in the range of at least 25-35 kopecks to a maximum of 1 hryvnia.
In the subsequent period of market correction, they will again narrow it down to more acceptable limits for citizens – from 25 to 30 kopecks per euro.
In the most “dangerous” period, banks traditionally minimize their risks: cash euro quotes at the cash desks will be in a wider buying and selling corridor from UAH 40.55 to UAH 42.35. In the exchange offices of financial companies, this corridor will already be from 40.50 to 42.20 hryvnia.
2023-07-20 04:20:00
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