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Forex Today: Markets quiet down ahead of high-tier data releases

Here is what you need to know on Thursday, January 5:

The US Dollar holds its ground against its major rivals early Thursday as investors seem to have moved to the sidelines ahead of key macroeconomic data releases. The hawkish tone seen in the minutes of the Federal Reserve's December meeting also provides support to the currency with the benchmark 10-year US Treasury bond yield recovering above 3.7% following a two-day slide. Trade balance data from Germany and November Producer Price Index figures for the Eurozone will be featured in the European economic docket. Later in the day, the ADP will publish the monthly private sector employment report for the US. Weekly Initial Jobless Claims and Goods Trade Balance data will be looked upon for fresh impetus in the second half of the day as well.

The risk-positive market environment made it difficult for the US Dollar to find demand on Wednesday. In the American session, however, the ISM's Manufacturing PMI report showed that employment in the manufacturing sector grew unexpectedly in December. Furthermore, the US Bureau of Labor Statistics reported that there were nearly 10.5 million job openings on the last business of November, compared to the market expectation of 10 million. The upbeat employment-related data helped the US Dollar shake off the bearish pressure. 

Meanwhile, the FOMC said in the minutes of its December meeting that most participants agreed that it would take "substantially more evidence" of progress to confirm that inflation is on the downward path. The publication also reminded investors that policymakers want to make sure that markets don't see the slower pace of rate hikes as preparation for a policy pivot. The US Dollar Index erased a large portion of its daily losses and closed above 104.00 on Wednesday before going into a consolidation phase on Thursday.

EUR/USD snapped a two-day losing streak on Wednesday. The pair fluctuates in a narrow channel slightly above 1.0600 in the European morning. It's worth noting that Euro Stoxx 50 Futures are trading flat on the day, reflecting the cautious market stance.

GBP/USD gained nearly 100 pips on Wednesday but struggled to preserve its bullish momentum. At the time of press, the pair was moving up and down near 1.2050. The Times reported late Wednesday that British Prime Minister Rishi Sunak was planning to announce a minimum strike legislation on Thursday.

USD/JPY trades modestly lower on the day below 132.50 early Thursday after having added more than 150 pips on Wednesday. Citing three sources familiar with its thinking, Reuters reported on Thursday that the Bank of Japan (BoJ) is likely to raise fiscal 2022 and 2023 forecasts for the core Consumer Price Index (CPI) in its new quarterly projections.

USD/CAD seems to have gone into a consolidation phase slightly below 1.3500 after having suffered heavy losses on Wednesday. Crude oil prices fell sharply on Wednesday after OPEC's output reportedly rose by 120,000 barrels per day in December despite production target cuts. The barrel of West Texas Intermediate lost more than 5% and settled near $73 on Wednesday. Crude oil's poor performance, however, had little to no impact on the Canadian Dollar's performance.

Gold price registered strong gains for the second straight day on Wednesday and registered its highest daily close in nearly 7 months slightly above $1,850. XAU/SD stays realatively quiet on Thursday amid the modest rebound witnessed in the 10-year US T-bond yield.

Bitcoin climbed to $17,000 on Wednesday but struggled to clear that level. BTC/USD was last seen trading flat on the day at around $16,850. Ethereum gathered bullish momentum and touched its highest level in three weeks at $1,272 on Wednesday before retreating to the $1,250 area on Thursday. 

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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