EUR/USD Pair Is Trading Around 1.0560, USD/JPY Is Above 136.20, GBP/USD Gained
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The dollar fell from a seven-week high on Monday as investors took stock of last week's strong US economic data and outlook for global interest rates. Friday's data showed that US consumer spending rose sharply in January, while inflation accelerated. Traders now expect the Fed to raise interest rates to around 5.4% by the summer.
USD/JPY
The first day of the new week for the USD/JPY pair was mixed in both the Asian and European sessions. The pair started the week at 136.4430, but fell to 136.00 during the day. At the time of writing, the yen was trading at 136.2970.
In late February, the Japanese yen weakened above 136 to the dollar, hitting its lowest level in more than two months as Ueda, nominated governor of the Bank of Japan, doubled down on the bank's very restrictive monetary policy.
The new governor of the Bank of Japan, Kazuo Ueda, said on Monday that the benefits of the bank's current monetary policy outweigh the costs, stressing the need to maintain support for the Japanese economy with very low interest rates.
The comments reinforced signals that the bank will not turn away from its dovish attitude anytime soon.
Previously, Ueda had opposed monetary tightening in response to cost-driven inflation and rejected immediate changes to the bank's yield curve control, warning that such measures would deeply hurt growth.
EUR/USD
EUR/USD started the week at 1.0556. In the Asian session, it mostly traded near 1.0550 and even 1.0560, then fell below 1.0540. In the European session, the euro was rising towards 1.0570. Currently, the EUR/USD pair is trading around 1.0560.
The US currency has benefited widely from the view that its central bank has more power and leeway to counter inflation. Meanwhile, the Eurozone has to meet the varying needs of its twenty national economies, some of which will struggle to cope with even minor further interest rate increases.
Interest rate differentials are likely to dominate euro fundamentals this week, although some key domestic data is emerging, most notably official eurozone inflation data. Due for release on Thursday and the annual base rate is expected to remain unchanged at 5.3%
GBP/USD
The movement of the cable pair resembles the movement of EUR/USD. GBP/USD started the week at 1.1950, but during the day GBP/USD fell towards 1.1930. In the European session, it gained an upward momentum and exceeded the level of 1.1980.
Politically, European Commission President Ursula von der Leyen is due to travel to the UK today to meet Prime Minister Rishi Sunak on a new Brexit deal. This could see a resumption of trade between Northern Ireland and the UK, but it has not really translated into the GBP yet.
AUD/USD
The AUD/USD pair is the worst performer among the major currency pairs. The Aussie Pair started the day above 0.6730 but fell towards 0.6700 in the next session. In the European session, AUD/USD has slightly increased and at the time of writing it is just above 0.6710.
The Australian dollar weakened to around $0.67, trading at its lowest level in nearly 2 months as better-than-expected US economic data boosted expectations that the Federal Reserve would need to raise interest rates further to stem rising inflation.
Weak domestic employment data also affected the currency with Australia's unemployment rate unexpectedly rising to 3.7% in Q4 despite expectations to hold steady at 3.5%.
Meanwhile, the Reserve Bank of Australia's latest monetary policy statement showed it had revised its inflation forecast for this year higher, saying price pressures were spreading to services and wages.
Source: investing.com, finance.yahoo.com
