EUR/USD Pair Is Trading Above 1.0670, USD/JPY Pair Drop Below 132
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As we enter the final trading day of 2022, the rebound in the dollar index can be attributed in part to investor repositioning as markets remain cautious ahead of the long weekend. The lack of data this week left markets fueled by renewed tension between Russia and Ukraine, as well as mixed sentiment around rising Covid numbers in China.
EUR/USD
The EUR/USD pair in the European session exceeded the level of 1.0680. It is currently trading just below that level - 1.0679
EUR/USD surged towards 1.0700 during European trading hours before pulling back slightly. The renewed weakness of the US dollar on the last trading day of the year seems to be helping the pair stay in the red in the absence of fundamentals.
In the absence of high-impact macroeconomic releases, investors are unlikely to take large positions on the last trading day of the year.
Data from the euro zone showed Spain's Harmonized Index of Consumer Prices fell to 5.6% on an annualized basis in its preliminary December reading from 6.7% in November. However, these data did not have a noticeable impact on the behavior of the euro against rivals.
The ISM Chigao Purchasing Managers Index for December will be the only data to appear in the US Economic Report.
GBP/USD
The Cable pair is trading at 1.2050 now.
GBP/USD managed to climb above 1.2050 early Friday after breaking a two-day streak on Thursday. As trading conditions remain weak on the last trading day of the year, the pair may struggle to make a firm move in either direction. Despite cautious market sentiment, the US dollar is struggling to find demand on Friday and is helping the pair limit their losses.
Fears of recession in the UK are likely to limit sterling growth in Q1 2023, especially if the housing market continues to deteriorate. In theory, the impact on the GBP should be negative, with lower housing demand resulting in softer inflation and a more dovish Bank of England (BoE).
AUD/USD
The Aussie pair was heading above 0.68 today and it managed to do so, but failed to maintain the level. At the time of writing, the AUD/USD pair is trading below 0.68 at 0.6794.
The Australian dollar is set to fall in 2022, falling for a second consecutive year as the US Federal Reserve's aggressive monetary tightening, China's economic woes and slowing global growth have affected the currency.
The Reserve Bank of Australia has also made a radical policy change after committing late last year to keeping the cash rate at a record low of 0.1% in 2022.
The RBA has now raised the cash rate to 3.1%, its highest since November 2012, and said it expects further tightening as part of ongoing efforts to bring down inflation.
USD/JPY
USD/JPY is trading below 132 on the last trading day.
In October, the yen fell to a 32-year low of nearly 152 per dollar as the Bank of Japan maintained its ultra-low interest rate policy while the US Federal Reserve began an aggressive monetary policy tightening campaign to curb rising inflation.
However, the currency recovered about half of those losses as Japanese authorities intervened in the FX markets and defended the yen in the last quarter of 2022, while the BOJ unexpectedly raised the upper end of its 10-year government bond tolerance range to 0.5% from 0.25 % in December.
Source: investing.com, dailyfx.com, finance.yahoo.com
