USD/JPY Pair Drop Below 130.00, GBP/USD Is Trading Below 1.2330, The Australian Dollar Remains Generally Up
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As investors price the Fed nearing the end of its rate hike cycle, the dollar index is far from its 20-year high of 114.78. Investors said Fed Chairman Jerome Powell's words would be watched closely. Aside from the main event of the Fed meeting, investors will also focus on the ISM manufacturing and job vacancies data due for release on Wednesday for further guidance on the state of the US economy and labor market.
Moreover, the ECB and the Bank of England are expected to raise interest rates by 50 basis points (bps) on Thursday.
USD/JPY
USD/JPY has struggled to gain any significant traction and has fluctuated between small gains and small losses throughout the early part of Wednesday's European session. Spot prices remain below mid 130.00 as investors appear reluctant and eagerly await outcome of two-day FOMC meeting.
USD/JPY pair trades below 130.00, at 129.7970.
Driven by the risk associated with key central bank events, investors seem reluctant to bet on an aggressive bear market around the USD/JPY pair. In addition, comments from BoJ chairman Kuroda Haruhiko that the central bank must continue its easing policy and keep the inflation target at 2% limit the gains for the JPY.
EUR/USD
On Tuesday, flash readings of gross domestic product (GDP) in the euro zone in the fourth quarter (Q4) increased by 0.1% q/q against 0.0% expected and 0.3% earlier. The year-over-year printouts also showed a rosy picture for the block as it surged above the 1.8% market consensus to 1.9%, down from 2.3% previously. However, retail sales in Germany fell by 5.3%MoM in December, much worse than expected.
According to data from the European Union's statistical office, Eurostat, headline inflation in the euro area fell sharply in January, while the core index remained unchanged from the previous month.
Investors said that data on inflation in the euro zone are unlikely to influence Thursday's monetary decision of the European Central Bank (ECB).
On Thursday, the bloc's central bank will raise interest rates by 50 bps as traders look to see if officials signal they are likely to maintain a similar pace of hikes at the March meeting, or suggest a slowdown in policy tightening.
EUR/USD was little changed after the release, with the pair finding and now stuck below 1.0900.
Source: investing.com
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GBP/USD
Fed policy makers emphasized the need to keep interest rates at a higher level for a longer period of time in order to lower inflation. This, in turn, suggests that the Fed will continue to sound hawkish, which in turn provides some support for the US dollar and acts as wind in the sails for the GBP/USD pair.
As such, investors will look to the accompanying monetary policy statement and remarks by Fed Chairman Jerome Powell at the post-meeting press conference for clues on the path ahead of interest rate hikes. This will play a key role in influencing USD price dynamics and provide a significant boost to the GBP/USD pair. Then focus will shift to Thursday's Bank of England (BoE) meeting.
The cable pair was trading close to 1.2300 during the morning trading hours. It then rose above 1.2330 before falling back and trading at 1.2325.
AUD/USD
The Aussie pair was rising today and traded above 0.7070 in the European session. The next upward move is likely to remain limited ahead of the key US central bank risk. Overall, the Australian dollar remains generally up.
Source: finance.yahoo.com, investing.com
