US CPI Inflation Acceleration Likely To See Hawkish Fed Retaliation (EUR/USD), On Thursday The Market Expects The BoE Monetary Policy Decision (EUR/GBP)
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Summary:
- High US CPI inflation is likely to cause the Fed to retaliate, offering USD support.
- The market is reflecting mixed market signals for the EUR/GBP currency pair.
- Sharp decline in the value of the JPY sparks BoJ response.
EUR/USD Bearish as the market expects a hawkish Fed
The market is reflecting bearish signals for this currency pair. The Euro to US Dollar exchange rate fell heavily during last week's trading week in the wake of a toxic combination of international and domestic headwinds and could likely remain under pressure in the coming days if the Fed and US bond yields continue to wear down global investor sentiment.
The high US CPI inflation rate indicates that inflation is showing no signs of peaking, the Federal reserve is likely to continue on its hawkish path of tightening monetary policy, which is offering the USD support.
EUR/USD Price Chart
Hawkish BoE could offer GBP support
The market is reflecting mixed market signals for this currency pair. On Thursday the Bank of England (BoE) is due to make a monetary policy decision, if the Bank adopts a more hawkish tone, the pound sterling could strengthen against the EUR. However, economists don't expect a large increase in interest rates and the BoE has been pushing back from hawkish market expectations for its interest rate to reach either 2% or more by year end.
EUR/GBP Price Chart
BoJ may be ready to step in to save the JPY
The market is reflecting bullish signals for this currency pair. On Friday the Bank of Japan (BoJ) made a joint government statement which echoed the concerns over the yen’s sharp decline, which indicated that the BoJ may be ready to respond appropriately. In his latest address to parliament, Kuroda stated, "The yen's recent sharp declines are negative for Japan's economy and therefore undesirable, as they make it hard for companies to set business plans".
USD/JPY Price Chart
AUD/JPY currency pair
The market is reflecting bullish market sentiment for this currency pair. The sharp weakening of the Japanese Yen has caused the BoJ to hint plans of stepping in to save the safe-haven currency.
AUD/JPY Price Chart
Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
