GBP/USD Started The New Week In A Calm Way, EUR/USD Is Waiting For US CPI Report
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The dollar approached a five-week high against its major peers on Monday, and investors increased their bets on the Federal Reserve staying on tight monetary policy longer. The most important event this week will be US consumer prices data released on Tuesday, which will strengthen expectations regarding Fed policy. Strong CPI data in the US would increase expectations for monetary policy tightening by the Federal Reserve, which would probably push the dollar up.
USD/JPY
USD/JPY started the new week at the level of 131.3470, and in the following hours it rose and broke through the level of 132.00. At the time of writing, USD/JPY is trading above 132.50. The asset is expected to refresh a four-day high above 132.00 as investors are extremely risk-averse ahead of the United States inflation report.
In January, Japanese investors became net buyers of foreign bonds for the first time in five months as US bond yields fell in a sign that slowing inflation would prompt major central banks to slow down the pace of interest rate hikes.
Japanese investors bought foreign bonds net worth 1.56 trillion yen ($11.79 billion) in January, according to data from Japan's Ministry of Finance, marking their biggest buying frenzy since September 2021.
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EUR/USD
On Friday, a preliminary consumer sentiment survey by the University of Michigan in February showed that annual expected inflation rose to 4.2% from 3.9% in February. The reading helped the US dollar stay strong against its rivals ahead of the weekend and forced EUR/USD to end the week in the red.
Early Monday, the US Dollar Index holds strong and limits EUR/USD's gains. The EUR/USD pair started trading at 1.0684 this week. In the following hours, EUR/USD fell towards 1.0660 but rebounded above 1.0680. At the time of writing, the EUR/USD pair is trading at 1.0675.
The European Commission raised the EU growth forecast for 2023. The European Commission noted that the EU economy entered 2023 in a better position than predicted in the autumn and raised its growth forecasts for this year to 0.9% in the euro area. The Eurozone looks set to avoid a technical recession, thanks in large part to falling gas prices and a solid labor market. The Commission has also lowered its inflation expectations, with headline inflation now expected to fall to 5.6% in 2023.
GBP/USD
The GBP/USD pair started the week at 1.2050. Similar to the Euro pair, the GBP/USD pair fell towards 1.2035 during the morning trading hours before rising above 1.2060 again. Currently, GBP/USD is trading at 1.2056.
The market awaits this week's data, which could show that unemployment in the UK remained flat in December and weekly earnings rose less than in November.
The British economy, similarly to the US, will publish inflation reports this week. UK is expecting inflation to fall.
UK retail sales figures for January are expected to show that while consumers continue to spend less, the pace of decline in sales may have slowed in the new year.
AUD/USD
Markets expects RBA Chairman Philip Lowe to reinforce the bank's hawkish stance at parliamentary hearings this week.
Reserve Bank of Australia (RBA) Governor Philip Lowe will testify before the Senate this week. Lowe will appear before the Senate Appraisals Committee on Wednesday, and then on Friday will give his semi-annual testimony to the House Economics Committee.
In between these public appearances will be squeezed in employment data on Thursday.
The central bank surprised markets last week by signaling at least two more rate hikes after raising the cash rate to a decade high of 3.35%. This stifled any talk of a break and led the markets to price in a final rate of 4.2%
The AUD/USD Pair started the week close to 0.6900, where it fell below this level in the following hours. The Australian pair managed to break above 0.6915 and is currently trading above 0.6930.
Source: investing.com, finance.yahoo.com
