USD/JPY Pair Is Trading Above 128 Again, The Testimony Of Bank Of England Governor Andrew Bailey May Have Affect On The Pound (GBP/USD)
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The dollar started the week on the back foot to a seven-month low against a basket of major competitors in Asian trading, with the yen in particular, as investors increased bets that the Bank of Japan would further improve its yield control policy.
USD/JPY
Year-on-year PPI by the end of December amounted to 10.2%, above the previous forecasts of 9.5% and 9.7%. The month-on-month figure for December was 0.5%, above 0.3% expected and 0.8% earlier. The data revealed upward revisions. From a macro perspective, the soaring PPI is problematic for corporate Japan, with companies facing a dilemma related to rising production costs.
The upcoming central bank meeting, expectations of an upward revision of the bank's inflation forecast, and the imminent announcement of a new BOJ chairman are also likely to fuel expectations for a policy change.
A generally positive tone around the equity markets undermines the safe-haven Japanese Yen and lends some support to the USD/JPY pair. Now the pair is above 128.20.
Source: investing.com
Source: finance.yahoo.com
AUD/USD
The AUD/USD pair started the new week on a positive note and climbed to its highest level since mid-August during the Asian session, surpassing the 0.70 level. Unfortunately, the Australian pair failed to hold above 0.70 and is now trading above 0.6970.
Iron ore, Australia's main export, fell slightly on Monday but remains well above its low of last October. Tomorrow, China's GDP data will be watched closely for clues on the health of the world's second-largest economy.
Higher commodity prices and China's quick re-opening from Covid restrictions have also supported the currency, with Australia's main trading partner partially lifting restrictions on Australian coal exports after an unofficial ban in 2020. Markets are currently divided over whether the RBA will make another rate hike in February.
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EUR/USD
EUR/USD showed a decent gain after breaking the critical resistance of 1.0840 in the Asian session. Although the EUR/USD pair failed to hold above 1.0840 and then dropped significantly, it has recovered and is trading above 1.0830.
The publication of the expected decline in the US consumer price index (CPI) for December increased the chances of further slowing down the pace of policy tightening by the Fed. It is worth noting that in December the Fed announced a less hawkish monetary policy. The Fed raised interest rates by 75 basis points (bp), but after observing a significant decrease in inflation, it may change the scope of the increase.
In the euro area, the European Central Bank (ECB) wants to reach the final interest rate faster. ECB Governing Council member and French central bank governor Francois Villeroy de Galhau, quoted last week, said the central bank should aim to reach its final interest rate by the summer.
GBP/USD
GBP/USD halted the correction, recovering to 1.2200 in the European session on Monday. The US dollar continues to rebound despite betting on smaller rate hikes by the Fed. Furthermore, a bank holiday in the US market could also keep volatility high around the GBP/USD pair with limited liquidity. Attention is now focused on the testimony of Bank of England (BoE) Governor Andrew Bailey before the Treasury Select Committee of the UK Parliament.
Source: investing.com, finance.yahoo.com
