EUR/USD And AUD/USD Are In Downward Trend, USD/JPY Hit 135.00, GBP/USD Is Below $1.20
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The dollar rose to a six-week high on Friday as strong US economic data and comments from Federal Reserve officials prompted investors to bet on another rate hike. The Fed's target range is currently between 4.5% and 4.75%.
Economists at Goldman Sachs on Thursday raised their expectations for Fed rate hikes this year. After previously expecting two more hikes, they said they now expect three more hikes of 25 bp in March, May and June. That would push interest rates to 5.25% to 5.5%.
The US Economic Report will not include any macroeconomic data releases that could significantly affect the behavior of the US dollar. As such, market participants will pay close attention to risk perception.
USD/JPY
The yen pair hit its highest level in almost two months. USD/JPY has been trending up since the start of the day. USD/JPY started the day trading just above 134.07 and has now crossed the 135.00 mark.
EUR/USD
EUR/USD extended its decline during the Asian trading hours and hit its lowest level since early January below 1.0650. The technical outlook for the short-term pair shows that the bearish bias remains intact.
Meanwhile, comments from Federal Reserve (Fed) and European Central Bank (ECB) officials add to the burden on the EUR/USD pair.
The euro could weaken further as the market's interest-rate rise expectations for the European Central Bank may be overdone given comments from ECB members about the risks of excessive policy tightening.
ECB board member Fabio Panetta said on Thursday that the ECB should consider the risk of unduly tightening policy and argued that the bank should not commit unconditionally in advance to future policy moves. From a more neutral point of view, the ECB's chief economist Philip Lane said he was open-minded about the exact amount of monetary tightening that would be needed to meet the inflation target.
On the other hand, Cleveland Fed President Loretta Mester reiterated that the interest rate will have to rise above 5% and stay there for some time for the Fed to control inflation.
GBP/USD
GBP/USD extends losses towards 1.1900 in the early European morning.
The strength of the US dollar (USD) had a big impact on the GBP/USD exchange rate in the second half of the week. Hawkish comments from Fed policymakers and the latest released macroeconomic data have revived expectations that the Fed may decide to make additional interest rate hikes even after May.
Data from the UK showed that retail sales rose by 0.5% in January, as compared to market expectations for a fall of 0.3%. While this reading was better than the market's 0.3% decline, December's -1% reading was revised lower to -1.2%, preventing Sterling from taking advantage of the data.
AUD/USD
Reserve Bank of Australia (RBA) Chairman Lowe's comments did not stop the AUDUSD rate from falling. Governor Lowe warned that the RBA was keeping an open mind and their view was that further rate hikes were needed. Lowe also stated that interest rates are not on a predetermined path as it takes 18-24 months for rate hikes to make an impact in the economy.
The pair of the Australian is in a downtrend on Friday. AUD/USD has fallen well below 0.69 and is trading below the 0.6820 level.
Source: finance.yahoo.com, investing.com
