Forex Today: Attention now shifts to central banks

Alternating risk appetite trends dominated the FX universe on Monday, in a week where interest rate decisions by many G10 central banks are expected to dictate the mood in the broader markets as well as key US data releases and advanced PMIs across the board.

Here is what you need to know on Tuesday, January 23:

The greenback navigated within a tight range at the beginning of the week, leaving the USD Index (DXY) around Friday’s levels near 103.30 amidst declining US yields. In what was the sole release in the US docket, the CB Leading Index contracted 0.1% MoM in December. On Tuesday, the Richmond Fed will publish its manufacturing gauge for the month of January.

EUR/USD traded mostly on the defensive, managing to ephemerally revisit the area beyond 1.0900 the figure amidst vacillating appetite for the risk complex and diminishing yields in the German money market. On Tuesday, the European Commission will release its flash Consumer Sentiment print for the first month of 2024.

The initial positive mood sustained the early bullish momentum around the British pound, prompting GBP/USD to advance north of the 1.2700 barrier. The move, however, fizzled out towards the end of the session in response to the late bounce in the greenback. Next on tap across the Channel will be the UK Public Sector finances during December.

Scarce volatility in the greenback in combination with the generalized downward bias in US yields sparked the first daily decline in USD/JPY after five consecutive sessions of gains. The BoJ takes centre stage on Tuesday, although no surprises are expected at its meeting.

AUD/USD resumed the downside and returned to the sub-0.6600 region after a failed move to the 0.6610/15 band during early trade. The negative session in copper and iron ore also added to AUD’s weakness.

WTI prices flirted with multi-day highs near the $75.00 mark per barrel on the back of escalating geopolitical concerns in the Middle East and Red Sea disruptions fears.

The resurgence of the selling bias saw prices of Gold partially fade the bounce seen in the latter part of last week, while Silver prices sank to multi-week lows, briefly piercing the $22.00 support.