Manufacturing surveys on Tuesday brought out stark differences in business activity, with expansion in the euro zone and Britain accelerating to the fastest pace in nearly a year while economic data pointed to a cooling in the U.S.

Top Forex news: Rand steady, Pound hits highs!

Such divergences have become a leading foreign exchange trend, pushing the euro in Asia above $1.07 for the first time in more than a week before giving back some ground to $1.0684.

Top forex trends: US GDP in focus

The publication of US gross domestic product and March personal consumption expenditure – the consumer price index that the Federal Reserve uses to set interest rates – are slated for later this week and will likely be the most critical in determining the direction of the week’s top forex trends.

Top forex trends: Fed to cut interest rates

Given that these metrics are the yardsticks used to gauge the potential alteration of US monetary policy, they will be the most important gauges for investors this week.

The broad market consensus is that the Federal Reserve will cut rates in September and that four 25-basis-point rate cuts will be made in 2019, down from 150 basis points projected at the start of the year, according to the CME’s FedWatch tool.

Top forex trends: Big shift in rates

A big shift in expectations of what rates will do going forward has driven Treasury yields up, and therefore driven the dollar up – especially in the forex markets of Asia. Indonesia’s central bank, for example, hiked rates unexpectedly in order to support the rupiah.

Top forex trends: Yen takes a dive

Another of the leading forex trends is in the Japanese yen, which fell to 154.9 per dollar, the lowest since 1990 in the run-up to a key policy meeting by the Bank of Japan. The yen has fallen almost 9 per cent so far this year and the feeling is acute that breaking though 155 could see Japanese authorities stepping in to stop the slide.

One senior Japanese Liberal Democratic Party figure said: ‘There’s no explicit talk of intervention levels for the yen, but 160 is the line. If the yen weakens to there, we will have to act.’

The frailties of recent forex trends tell us how policy and economics are closely intertwined.

Meanwhile, 10-year Treasury yields were only marginally higher, signalling broader market dynamics affecting the major forex trends.

Oil prices also fell on the day, with U S crude ending at $83.03 and Brent at $88.02, and the price of brent crude is always important in forex markets.

Top forex trends: South African Rand unchanged

South Africa’s rand traded virtually unchanged in early trade Wednesday to trade near the previous day’s close after modest gains on a better risk mood.

At 0714 GMT the rand was most recently trading at 19.1250 against the dollar, close to its previous close of 19.1125.

This stability in the rand comes ahead of Wednesday where there are no scheduled economic data releases, but March producer price inflation data are due on Thursday.

Until the dollar loses more ground, rand is not likely to test the 19.00 level anytime soon.

Top forex trends: optimism in SA finance markets

Meanwhile, signs of optimism spread across other South African financial markets, with the country’s all-share stock index advancing 0.72% in early trade on Monday, and the Top-40 index rising 0.79%.

The country’s benchmark government bond maturing in 2030, on the other hand, weakened slightly, with yields rising 1.5 basis points to 10.710%.

This delicate shuffling of stocks and bonds was accompanied by the more subtle gyrations in the forex space, where the rand remains one of the year’s most noteworthy forex trends.

Top forex trends: Yen hits record lows

After a dramatic rally Tuesday, the yen crashed to the lowest level against the dollar in 12 years Wednesday, sending ripples of panic through global markets and speculation that Japanese authorities would intervene to prop up the nation’s embattled currency.

The dollar rose to its highest level against the yen since 1990, 155.17 yen, and then retreated in volatile trading – a clear sign that the market is sensitive around the 155 level.

It was last around 154.97 yen, up 0.09% from earlier on Wednesday.

It’s this dollar strength that has been fuelled by recent robust US inflation readings, helping the dollar up to five-month highs and cementing market bets that the Federal Reserve may delay interest rate cuts this year.

This once again places the prospect of Japanese forex-market intervention back squarely onto the list of the most important forex trends for 2023.

Japan’s finance minister Shunichi Suzuki and other officials have confirmed that they keep a close eye on currency movements and that they are ready to act if required.

Last week’s International Monetary Fund/World Bank Spring meetings in Washington had the strong dollar very much on people’s minds, with the United States, Japan and South Korea issuing a rare joint statement on the currency question.

Top forex trends: Bank of Japan takes action

At this week’s Group of 20 (G20) finance leaders’ meeting, the Bank of Japan Governor Kazuo Ueda said the central bank might consider hiking interest rates if inflation pressures kept rising as a result of the yen’s decline.

In truth, the weak yen is now a dilemma for Japanese policymakers, as for all the greenbacks coursing through the US economy.

Such is the nature of many of the top forex trends these days – they are complicated.

The Bank of Japan this week concludes its latest policy meeting on Friday. Monetary policy watchers will be paying close attention, on the off-chance some shift is signalled by top forex trends.

Sterling took a breather on Wednesday, pulling back some of Tuesday’s gains from what had been its best one-day performance in four months, as a report showing a slower than expected pick-up in US business activity hurt the dollar.

Sterling traded down 0.1% at $1.2435, after a 0.8% rise the previous day. The euro held steady against the pound at 85.99 pence.

Pound drops to lowest since November on Monday after BoE officials ratcheted up expectations that UK inflation had peaked and rates cuts could come sooner than markets expect.

This week has seen more wild swings in the pound, hitting its lowest level since November on Monday, with the moves sparked by comments from Bank of England (BoE) officials that they are growing more confident that UK inflation had peaked and rates could be cut sooner than markets currently expect.

BoE Governor Andrew Bailey this week said inflation was beginning to track closely with the central bank’s latest forecasts.

However, BoE Monetary Policy Committee member Dave Ramsden said the risk of stubbornly high price pressures were receding, although the committee is still split on when rates might be cut.

Recent market sentiment, however (particularly as seen in the relatively efficient ‘derivatives’ market) indicates that the bond-market mavens foresee a possible August rate cut, along with another by year-end, with just under a 40% probability that a cut could come as early as this coming June.

Such expectations are the foundation for many a current chatter about FX top trades.

MUFG currency strategist Derek Halpenny noted the split in the MPC and the difficulty of getting a majority of votes in the near term for rate cuts: a June cut is a close call and still requires some benign developments on the inflation front, he wrote in a note to clients.

The market watchers keep monitoring the same set of indicators that are responsible for these top forex trends.

Making things more complicated for the BoE is recent data suggesting a pick-up in Britain’s business activity, coupled with input costs for businesses rising to the highest level since May of last year.

Meanwhile, perhaps the most anticipated signal from the BoE is wage growth, which remains a critical factor in the central bank’s current assessment of top forex trends.

A recent industry survey pegged median wage settlements at 4.8% higher than year-ago levels – JP Morgan economists say that’s down a bit from February, which saw a 5% reading.

Before the BoE considers a rate cut, most members are looking for annual wage growth to ease back towards the 3-4% level from the recent 6%, which is another important consideration in the latest assessment of top forex trends.

Bank Indonesia (BI) on Wednesday shocked the market by hiking rates to support the plunging rupiah to four-year lows, as risk aversion hits and expected US policy adjustments are delayed.

The 25-basis point increase in the 7-day reverse repurchase rate, to 6.25%, is its highest since it became the main policy rate in 2016. This is one of the main forex trends today.

The move, which had been widely predicted only by the minority of polled economists, came along with similar increases in the deposit and lending facility rates to 5.50% and 7.00% respectively.

‘Raising interest rates is to support the stability of the rupiah exchange rate in response to growing global risks,’ explained BI governor Perry Warjiyo in a characteristically strategic play on the top forex trends.

Shortly after the announcement, the rupiah rose 0.4% against the greenback, but is still down about 4% so far this year, mostly due to the march of the dollar.

Governor Warjiyo also delivered a rare forecast, suggesting that the rupiah is poised to stabilise this quarter at 16,200 to the dollar and potentially fall to 15,800 per dollar by the end of the year.

It appears to be a top forex signal for this year.

With market sentiment turning risk-off, triggered by revised expectations of two further rate cuts in the United States plus geopolitical tensions in the Middle East, BI has chosen the offensive to defend the rupiah.

You can call it the Fed put, elevated to the status of the Rupiah put. BI expectations that the Federal Reserve will begin to ease monetary policy in December, with a 25-bps cut in policy rates remains, though the risk of further delay is now apparent.

The increase in the BI rate would be expected to reduce such yield differentials, strengthen Indonesia’s balance sheet and firm up the rupiah, thus bolstering confidence in Indonesia’s ability to keep a lid on volatility in the top forex trends.

BI also wants to keep inflation within its target range as it seeks to offset domestic effects of the rise in global energy and food prices. Economists like Satria Sambijantoro, an economist at Bahana Securities, are confident the hike will achieve all this.

This move by BI leaves no doubt as to its determination to keep a firm hand on the nation’s purse strings, while also bringing its weight to bear on the most prominent forex trends, since it keeps its growth forecast for Indonesia’s economy unchanged, predicting it would grow