EUR/USD Drop Below 1.0700$ And GBP/USD Drop To 1.967$, The Aussie Pair Holds Above 0.69
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The US dollar was mixed against its major trading partners early Tuesday - up against the euro and pound, down against the yen and the Canadian dollar.
Today, Fed head Powell will speak. Powell will have to reconcile last week's decision by the Federal Open Market Committee to slow the pace of interest rate hikes with the exceptionally strong employment data for January released on Friday.
In addition to Powell, Fed Vice Chairman for Supervision, Michael Barr, is set to speak at 14:00 ET. For the rest of the week there will be Fed officials.
USD/JPY
USD/JPY is rising after the US Fed raised interest rates by 25 basis points last week, and Chairman Powell said the central bank could deliver a few more rate hikes to bring inflation down to target.
Additionally, reports that Bank of Japan Vice Governor Masayoshi Amamiya could replace the current Haruhiko Kuroda as central bank governor provided some support for USD/JPY as the BoJ's ultra-easy policy is expected to continue.
USD/JPY is under some selling pressure on Tuesday and pulls some of the previous day's gains down to around 133.00, a monthly high. After the pair fell below 132.00, it is currently holding just above 132.0190.
EUR/USD
The EUR/USD pair extended its decline to a new three-week low below 1.0700 as demand for the US dollar prevails ahead of US Federal Reserve (Fed) President Jerome Powell's speech.
Investors await speeches from ECB officials and FOMC chairman Jerome Powell.
During the European morning, Germany published data on industrial production in December, which fell by 3.1% over the month and by 3.9% a year earlier, much worse than expected. The United States will publish a balance of trade in goods and services in December, which is expected to show a deficit of USD 68.5 billion.
Continuing its decline, EUR/USD dropped below 1.0700 to 1.0694 and looks set to drop further.
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GBP/USD
Sterling hit a new monthly low against the US dollar on Tuesday as investors expect the Bank of England (BoE) to end and possibly reverse its monetary tightening cycle soon, while the US Federal Reserve may hold interest rates higher for longer.
Investors await further comments from the Bank of England and preliminary UK Gross Domestic Product (GDP) data.
GBP/USD came under bearish pressure again and hit a month-low below 1.2000 on Tuesday. Despite a slight improvement in risk sentiment, the US dollar holds its ground and weighs heavily on the GBP/USD pair.
AUD/USD
The Australian dollar rose high after the RBA raised its cash rate target to 3.35% from 3.10%. Since the first increase in May 2022, a total of 325 basis points have been added. The Australian dollar gained above $0.69, bouncing back from monthly lows following the RBA decision.
The RBA said in an accompanying statement: "The board expects further rate hikes will be needed in the coming months to ensure inflation returns to target and that this period of high inflation is only temporary."
Following the RBA decision, the Aussie Pair holds above 0.69 but the pair has lost momentum and is closer to 0.6900 than close to 0.6930.
Source: finance.yahoo.com, investing.com
