The U.S. dollar rallied on Monday against some but not all of the major currencies. Our readers should not find the rally in USD/JPY or decline in EUR/USD surprising because we talked about how a soft jobs report changes nothing for U.S. policymakers on Friday who are laser focused on inflation. Ten year Treasury yields recovered nearly all of Friday’s losses with the Dow Jones Industrial Average rising more than 600 points. We have now entered the pre-FOMC quiet period and barring any negative Omicron news, Friday’s consumer price report will be the only market moving news on the calendar this week but even that may not trigger big moves in currencies. Fed Chairman Powell made it very clear that high inflation needs to be addressed with faster taper – an announcement they are widely expected to make next week. There’s a very good chance Friday’s CPI report will reinforce their more aggressive intentions.
Meanwhile one of the best performing currencies today was the Australian dollar. AUDUSD dropped below 70 cents before rebounding to end the day near .7050. With a Reserve Bank monetary policy announcement this evening, today’s move can be attributed to short covering and a hint of optimism. The RBA is not expected to change policy as they’ve made it very clear that rates will remain unchanged throughout 2022, but they could lift their growth and inflation forecasts. Thanks to fewer restrictions, the economy is recovering. Job ads surged 7.4% last month with firms ramping up spending plans. So far, Omicron has not had a significant impact on the economy but minimally, the travel industry will be affected. China is the country’s largest inbound tourist market and provides a $12 billion contribution to the economy.
The worst performing currency was euro. Not only are coronavirus cases rising across the continent but European nations respond more quicky with lockdowns and restrictions. As evidenced by the latest factory orders report, the Eurozone economy is underperforming the U.S. Factory orders plunged -6.9% in the month of October, which was much weaker than anticipated and foreshadows downside suprises in tomorrow’s German industrial production and ZEW survey.
Then second best performing currency was the Canadian dollar which shot higher on the back of rising oil prices. Crude jumped 5% to just under $70 a barrel. This recovery along with Friday’s strong labor market report are some of the many reasons why the Bank of Canada is expected to remain hawkish this week. Tomorrow’s Canadian IVEY PMI and trade balance reports are expected to reinforce the strength of Canada’s economy and the gains in loonie. Further losses are likely in USD/CAD – which has formed a triple top on the daily chart. The improvement in risk appetite also drove sterling and the New Zealand dollars higher.
Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
USD/JPY holds positive ground around 151.50 following Japanese CPI data
The USD/JPY pair holds positive ground for the second consecutive day near 151.45 on Friday during the early Asian trading hours. The cautious approach from the Bank of Japan to keep monetary conditions accommodative exerts some selling pressure on the Japanese Yen.
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
Gold price finishes Thursday’s session set to reach new all-time highs
Gold price rallied during the North American session on Thursday and hit a new all-time high of $2,225 in the mid-North American session. Precious metal prices are trending higher even though US Treasury yields are advancing, underpinning the Greenback.
Bitcoin price extends retreat from $69K as old whales shift their holdings to new whales
Bitcoin price continues to move further away from the $69,000 threshold, gaining ground as BTC bulls hope for a retest of the $73,777 peak. This is because of the general assumption that clearing this blockade would set the tone for a reach higher, marking a new all-time high.
Bears have been standing before a steamroller so far this year
Despite a pushback on rate cuts from Christopher Waller, and what was supposed to be cautious trading sentiment ahead of critical US inflation data released later on Friday, the S&P 500 rose on Thursday, marking its best first-quarter performance in five years.