FX: EUR/USD Is Above 1.06 Again, GBP/USD Also Gained
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The U.S. dollar resumed its rally on Tuesday after dipping against sterling and the euro a day earlier, putting it back on track for its first monthly gain since September.
The greenback's rally gathered momentum in recent weeks as upbeat economic data led to mounting expectations that the U.S. Federal Reserve will have to raise interest rates more than initially expected.
The US economic report will include the Conference Board's Consumer Confidence Survey for February.
In January, the annual expected consumer inflation component of this survey rose to 6.8% from 6.6% in December. The latest inflation data for January showed that price pressure remained higher than expected. If consumers' inflation expectations continue to rise, the US dollar could gain strength in the second half of the day.
USD/JPY
In the Asian session, the yen traded in the range of 136.20-136.30, but in the Asian session there was a sharp increase and at the time of writing USD/JPY is trading at 136.6930.
Recent comments from new BOJ vice-president Shinichi Uchida and current BOJ governor candidate Kazuo Ueda had a dovish tone during testimony before the upper house of the Japanese parliament. Ueda confirmed his intention to stick to "abenomics" and defend the central bank's monetary policy stance.
Japanese data released overnight were mixed as industrial production was weaker than expected and retail sales rose. Industrial production recorded the first decline in 3 months, when production fell in January by 4.9%MoM. Retail sales rose by a solid 1.9% m/m, with clothing and motor vehicles having the largest share. Manufacturing in Japan remains an area of ​​concern; however, consumption looks good and is indeed on track to recover.
EUR/USD
The euro pair fell in the morning session from levels above 1.06 to levels around 1.0585. In the European session, the EUR/USD pair rose significantly above 1.0620. At the time of writing, the EUR/USD pair is trading around 1.0615.
However, deteriorating market sentiment seems to be limiting the pair's gains for now as the focus shifts to the Conference Board's US consumer confidence survey.
The consumer price index (CPI) in France rose to 7.2% y/y in flash estimates in February from 7% in January. Similarly, the annual CPI in Spain rose to 6.1% from 5.9% in the same period. After stronger-than-expected inflation figures from major eurozone economies, markets are almost fully pricing in the European Central Bank's (ECB) final interest rate at 4%, down from 3.75% last week, with hawkish ECB betting helping the euro hold its ground.
GBP/USD
The cable pair in the Asian session maintained a downward trend and in its decline headed to the level of 1.2028. The European session provided a positive impulse for GBP/USD and the pair rose above 1.2090. The pound pair managed to break above the 1.21 level but failed to hold and is currently trading below that level at 1.2098.
Meanwhile, British Prime Minister Rishi Sunak announced late Monday that he had reached an agreement with the European Union to replace the Northern Ireland Protocol with the Windsor Framework. While it's too early to tell whether these developments could have a lasting impact on sterling's valuation and the Bank of England's (BOE) policy outlook, the initial market reaction helped the pair to gain momentum.
UK Prime Minister Sunak also noted that MPs would vote on the new deal and that they would respect the results of the vote.
Later in the session, several BOE decision makers will give speeches.
AUD/USD
In the Asian session, the Australian pair recorded a significant drop from the 0.6750 levels to the 0.6710 levels. In the European session, the AUD/USD pair is rising again and trading around 0.6730.
Source: investing.com, finance.yahoo.com, dailyfx.com
