GBP/USD Is Strengthening And Trading Above 1.2260, Investors Took A Breather Ahead Of The Bank Of Japan Meeting
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The US dollar is under pressure as the market seems to expect the Federal Reserve to ease its aggressive monetary policy later this year.
USD/JPY
The yen was close to a seven-month high as investors took a breather ahead of a potential change in policy at the Bank (BOJ).
At the last meeting, the Yield Curve Control (YCC) program was changed, setting a range of +/- 0.50% around zero for Japanese government bonds (JGB) for up to 10 years. They previously targeted +/- 0.25% around zero.
While they are not expected to change their prime interest rate, which currently stands at -0.10%, another change to the long-term yield target range is being discussed.
Today, USD/JPY managed to break above 129 but failed to hold. The USD/JPY pair stabilized above 128.50.
AUD/USD
The Australian dollar jumped towards yesterday's six-month high against the US dollar, with China's GDP much better than forecast.
China's GDP printed at 2.9% year-on-year in the fourth quarter versus expectations of 1.6% and 3.9% previously. At the same time, other Chinese data were released, and industrial production for the year to end-December was 1.3% instead of the expected 0.1%.
On the monetary policy side, the local market favors a quarter-point hike from the Reserve Bank of Australia (RBA) to 3.35% in February, with some chance it could stop at its first meeting since May. Australian government bond yields remained stable, albeit close to last week's one-month lows.
Monday's drop in the AUD/USD pair did not affect the prevailing uptrend. The pair of the Australian in the morning session was approaching the key level of 0.6975, the pair managed to exceed this level, but did not hold it and fell in the European session. Currently the Aussie Pair is trading above 0.6955.
GBP/USD
The British pound edged higher on Tuesday after data showed a tight labour market and accelerating pay growth.
GBP/USD trades above 1.2200, bouncing back from daily lows after the UK jobs report. The UK unemployment rate stabilized at 3.7% in November, while average hourly earnings rose more than expected.
GBP/USD raises bids to reverse early-week pullback from monthly high. Broad US dollar pullback lays foundation for cable pair recovery ahead of key jobs report. Talks of Brexit labor shortages, UK labor strikes and British Prime Minister Sunak's difficulties are being explored by the GBP/USD bulls.
The Bank of England is expected to raise interest rates at its tenth consecutive meeting on February 2 in an attempt to bring inflation down further.
Today's UK employment data becomes more important for GBP/USD traders. The pair traded close to 1.2200 in both the Asian and European sessions and also fell below 1.2200. Currently, the cable pair is rising and trading above 1.2260
EUR/USD
The latest German economic sentiment index, ZEW, rose in January, beating both last month's reading and market forecasts. The positive reading, the first since February 2022, points to "a notable improvement in the economic situation over the next six months"
Today's ZEW release had little or no impact on the euro, which has been treading water against the US dollar so far. EUR/USD remains above 1.0800. The euro is expected to take center stage as the European Central Bank (ECB) aims to peak interest rates by the summer.
The EUR/USD pair started Tuesday trading around 1.0830. In the European session it fell below this level. It managed to cross 1.0840 but dropped to around 1.0835
Source: investing.com, dailyfx.com, finance.yahoo.com
