The Euro Benefited From The Weakening Of The US Dollar, A Potential Downside Risk For The Australian Dollar Over The Next Few Weeks
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The euro stabilized against the US dollar on Thursday and the U.S. dollar clawed back some of the previous day's declines, as the market weighs in on the Fed's rate hike path.
- The euro benefited from the weakening of the US dollar
- The Australian dollar against the US currency fell sharply
- the 10-year Treasury note has fallen almost continuously
EUR/USD was unable to overcome its late-June high
EUR/USD hit a five-month high earlier this week but was unable to overcome its late-June high of 1.0615. The pair's mood remains bearish today. Compared to the previous day, the EUR/USD pair has fallen and is trading around 1.0469.
The euro gained overnight after better-than-expected euro-wide GDP data showed an increase of 0.3% q/q in the third quarter instead of the expected 0.2%. This may indicate that the economic slowdown in Europe may not be as serious as previously feared. The European Central Bank will review its policy on 15 December. The broader weakness of the US dollar also helped strengthen the euro.
GBP/USD
The pound fell 0.3% against the dollar to $1.2175 and fell 0.35% against the euro. Sterling falls as falling UK house prices add to recession fears.
The UK is facing a winter of strikes as rail workers, teachers and nurses demand better wages as the cost of living soared, exacerbated by rising energy costs after the Russian invasion of Ukraine. What's more, the prospects for next year are equally bleak. The UK economy could contract in the coming months.
AUD/USD- commodity prices have a negative impact
The Australian dollar against the US currency fell sharply this week. Currently, the pair is trading at mid-September levels.
From The Australian Dollar (AUD) perspective, commodity prices have a negative impact on the currency coupled with yesterday's weaker GDP data. This morning started positively for the Australian dollar with a better-than-expected trade balance for October, but today the main focus will be on the US labor market data. If the reports turn out to be positive for the dollar, they will bring bears for the AUD/USD pair.
Most recently, the Australian dollar got support from the easing of COVID restrictions in China, but that has since dissipated due to the rising number of COVID cases causing concern.
The RBA's decision on interest rates also failed to support the Aussie.
Overall, the current fundamental headwinds facing the AUD outweigh the US Dollar, which could suggest a potential downside risk for the Australian Dollar over the next few weeks.
JPY is weaker
The Japanese Yen is slightly weaker so far today despite GDP there narrowly beating forecasts. Annualised GDP was -.08% for the third quarter instead of -1.1% anticipated.
The Japanese yen (JPY) which is highly sensitive to shifts in U.S. Treasury yields, fell 0.2% to 136.82. Instead the dollar-yen pair jumped. Currently, the pair is trading around 136.8130. The yield on the 10-year Treasury note has fallen almost continuously since hitting a 15-year high in late October.
The Bank of Japan's ultra-loose monetary policy at a time when other central banks around the world are aggressively raising interest rates has made the yen the weakest major currency in the world in recent months. As a result, the USD/JPY exchange rate increased.
However, according to some experts, the yen may rise against the US dollar next year.
Source: finance.yahoo.com, dailyfx.com, investing.com
