AUD/USD Rose Above 0.66, USD/JPY Drop Below 137.00
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The dollar held near a three-month high on Thursday, backed by a message from Federal Reserve Chairman Jerome Powell that interest rates will need to go higher and possibly faster.
On the second day of his testimony before Congress on Wednesday, Powell confirmed his message, though he made a cautious point, saying that the debate over the scale and path of future interest rate hikes is still ongoing and will depend on the data.
USD/JPY
The yen pair has been in a downtrend since the beginning of the day. During the day, USD/JPY dropped from 137.2360 to 136.2230.
Concerns about a deeper global economic downturn continue to weigh on investor sentiment, which in turn favors a safe haven for the Japanese yen (JPY) and puts some downward pressure on the major currency. Market concerns were further fueled by the latest Chinese inflation data, which showed that domestic demand remains weak and weakened hopes for a strong recovery in the world's second largest economy.
However, any significant pullback in USD/JPY still seems elusive amid expectations that the Bank of Japan (BoJ) will remain dovish to support a fragile domestic economy. In fact, the new BoJ governor, Kazuo Ueda, recently stressed the need to maintain ultra-loose policy settings and said the central bank is not aiming for a quick turnaround from a decade of massive easing. Bets were further raised after the release of the final GDP print, which showed Japan's economy narrowly avoided a technical recession in the final months of 2022.
EUR/USD
The euro pair started the day with a drop from 1.0556 to 1.0542. After this decline, the EUR/USD pair started an upward move towards 1.0570. After this move, the EUR/USD pair fell to the level of 1.0562.
EUR/USD remains close to monthly lows after the recovery faded near 1.0570 during the US session. The US dollar failed to pick up a new leg, but maintained its recent gains. The dollar looks solid as markets are priced at "higher for longer" US interest rates. Data released on Wednesday helped consolidate expectations. Market participants also see a more hawkish European Central Bank (ECB) as recent research points to a higher final rate.
Thursday's economic report does not include first-tier reports for the eurozone and preliminary claims for US unemployment benefits. Markets will continue to weigh Powell's message as they prepare for non-farm payrolls.
GBP/USD
The beginning of trading in the GBP/USD pair started trading with the application to the euro. Then, still in the Asian session, it rose slightly. The cable pair recorded a significant increase at the beginning of the European session and exceeded 1.1880. Currently, the level of the GBP/USD pair is above 1.1870.
A permanent rebound seems unlikely as buyers refrain from betting on sterling further strengthening due to policy divergence between the US Federal Reserve and the Bank of England, although BoE expectations are hawkish.
AUD/USD
The Australian pair traded in the 0.6580-0.6595 range at the beginning of the Asian session. Still in the Asian session there was a significant increase above 0.6610. After this surge, AUD/USD traded in the 0.6610-0.6615 range. At the time of writing, the Aussie pair is trading at 0.6612.
The Australian dollar is trying to bounce back this Thursday after Tuesday's decline.
The morning started with weak economic data from Australia in the form of building permits and private home permits for January. Both sets of data printed in line with estimates but reached levels last seen in January 2022. This deterioration in the housing and construction sectors is a reflection of the high interest rate environment created by the Reserve Bank of Australia (RBA).
Source: investing.com, finance.yahoo.com
