FX Weekly Summary: Euro Holds At 1.06, The Main Focus Of AUD Now Is On The RBA's Interest Rate Decision
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The U.S. dollar slid from a 2-1/2-month high versus the Japanese yen on Friday, on track for its largest weekly loss since mid-January against a basket of six major currencies, as traders stepped back to gauge the path for Federal Reserve policy.
At the beginning of the week, optimistic PMI data for manufacturing from China allowed risk flows to return to the markets and hindered the strengthening of the USD.
USD/JPY
The yen pair started trading at 136.3840 for the week. Throughout the week, USD/JPY held above 136.00 except on Wednesday, where it traded below that level, recording a weekly trading low of 135.27. The next day, the yen pair rose and registered its highest trading level of the week at 137.05. The pair failed to maintain momentum and fell below 136.00 on the last day of trading to end the week at 135.8310.
The Japanese Yen is weighed down by expectations that the Bank of Japan (BoJ) will stick to its dovish stance for the foreseeable future. In fact, the incoming BoJ Governor Kazuo Ueda stressed the need to maintain the ultra-loose policy to support the fragile economy and said earlier this week that the central bank isn't seeking a quick move away from a decade of massive easing.
EUR/USD
The beginning of trading in the EUR/USD pair was at weekly lows. The euro pair started trading at 1.0550 and for the first two days of the week rose above 1.06. This increase did not last long and the EUR/USD pair fell below 1.06. The beginning of the new month was very favorable for the euro pair as it gained and reached the highest trading level of the week at 1.0689. The exemplary momentum did not last long and the pair found themselves under pressure to fall towards 1.0580 again. The pair last day rebounded and traded above 1.06 (1.0638).
GBP/USD
The beginning of the week and at the same time the end of the month was favorable for the pound and the GBP/USD pair gained and thus reached the highest trading level of the week (Tuesday) at 1.2140. The new month brought a downward move to the cable pair and the pair tested below 1.20 again. On the last day, GBP/USD made up for the previous day and managed to cross the 1.20 level and close the trade at 1.2045.
The British pound found some support on Friday thanks to the UK Services PMI data, as well as renewed risk appetite after better-than-expected China PMI data.
From the UK's perspective, the focus will be on British GDP, which is likely to fall below 0%, and if the actual figures are confirmed, fears of recession will return, possibly hampering GBP growth.
AUD/USD
For the Australian, trading in the week was mixed, with both highs and lows. For the first days of trading, the AUD/USD pair gained in the direction of 0.6760, then fell sharply to open the week's low at 0.6698. After falling, the Aussie Pair rose until it reached a weekly high at 0.6783 before falling back towards 0.6710. The last day of trading was up for the AUD/USD pair, the pair ended the week close to the week's high, at 0.6771.
The decline in the Australian dollar stalled after surprisingly strong data on manufacturing and services in China. However, for the AUD/USD rebound to be sustainable, a reversal in Australia's monetary policy and growth divergence with US monetary policy may be necessary.
The macro data from Australia since early March has been disappointing. The Australian economy expanded at its weakest pace since last quarter, while monthly consumer prices rose less than expected in January. Building permits have fallen the most in history, suggesting the housing market is in the throes of interest rate hikes by the Reserve Bank of Australia.
The main focus now is on the RBA's interest rate decision scheduled for March 7 - the central bank is widely expected to raise the cash rate by 25 basis points.
Source: finance.yahoo.com, investing.com
