USD/JPY Is Trading Close To 134.00, EUR/USD Is Remaining Above $1.07
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The dollar stalled on Thursday as investors scooped up higher-risk currencies after a string of strong US economic data bolstered confidence in the global growth outlook, even as the Federal Reserve appears poised to raise interest rates further.
However, the question for market watchers is how well the economy can hold up, especially as interest rates are much higher than many initially thought.
The US Bureau of Labor Statistics will publish data on the producer price index (PPI) for January. It is forecast that in annual terms the PPI will fall to 5.4% from 6.2% in December and the core PPI will fall to 4.9% from 5.5%.
USD/JPY
The yen pair started the day trading above 134.00, but the upward momentum was not maintained and USD/JPY fell below that level to 133.70. In the following hours, USD/JPY tried to make up for losses. At the time of writing, the yen pair is close to 134.00 and trading at 133.9520.
The appointment of former BJ board member Kazuo Ueda as governor of the central bank cooled speculations about an early normalization of interest rates. In the past, Ueda has warned of the danger of premature interest rate hikes, putting an end to any fears of higher interest rates in the foreseeable future. The perception that Ueda could improve YCC, given accelerating inflation, could at least limit USD/JPY's rise.
EUR/USD
EUR/USD regained traction after Wednesday's declines and moved into positive territory just above 1.0700 early in the day on Thursday. The EUR/USD pair is trading slightly above 1.07.
European Central Bank President Christine Lagarde told the European Parliament on Wednesday that she intended to raise key interest rates by 50 basis points (bps) in March. Lagarde reiterated that core inflation in the euro area is still high and price pressures remain strong.
Later in the day, ECB Chief Economist Phillip Lane and ECB Executive Board Member Fabio Panetta will deliver speeches. If ECB officials leave the door open to additional rate hikes after March, euro losses are likely to remain contained in the short term.
GBP/USD
The Bank of England has already signaled it may stop raising interest rates in March, and Wednesday's inflation figures reinforced that view. Softer-than-expected January UK inflation data weighed heavily on sterling during European trading hours on Wednesday.
GBP/USD is trading positive around 1.2050 on Wednesday. Positive turnaround in risk sentiment helps pair maintain gains as investors await US macro data releases.
The UK inflation data released yesterday surprised negatively, which resulted in lower expectations for rate hikes. This also followed positive employment data, with market participants now pricing in a peak rate below 4.5%.
This week's positive data could be the stimulus the Bank of England (BoE) needed to signal an early pause in rate hikes that could see GBP face further selling pressure.
AUD/USD
The recent decline of the Australian dollar against the US dollar reflects the disparity in the growth prospects of the two economies. This morning's decline from the dismal Australian jobs was no exception - employment fell for the second month in a row in January, while the unemployment rate rose to its highest level since May.
The pair has maintained its intraday gains for the first half of the European session and is currently trading near the 0.6920 region.
Source: investing.com, finance.yahoo.com
