In this article, we have covered the highlights of global market news about the USD/CAD, EUR/USD, GBP/USD and USD/JPY.
USD/CAD is still on the defensive around the mid-1.3500s, but the fall seems limited.
On Wednesday, the USD/CAD pair experienced some selling pressure and fell from a three-week high at the 1.3645 level reached the day before. During the early hours of the European day, spot prices are dragged below mid-1.3500s by an intraday decline supported by a slight decline in the US dollar.
The US Dollar bulls are on the defensive due to several issues, which are regarded as applying some negative pressure to the USD/CAD pair. Investors have priced in a comparatively lower 50 bps lift-off in December because they are sure that the Fed would decrease the pace of its policy tightening. A softer tone around US Treasury bond rates and stability in the stock markets put pressure on the safe-haven dollar, which serves as indicators of this.
Despite a slight intraday decline in Crude Oil prices, which tends to weaken the commodity-linked Loonie, the downside for the USD/CAD pair seems muted. The speculation that OPEC may announce more supply cutbacks at its summit on Sunday is overshadowed by worries that increased COVID-19 regulations in China will reduce gasoline consumption. As a result, the black liquid cannot benefit from this week’s strong rebound move from the YTD low.
According to Commerzbank, the EUR/USD is expected to fall around 1.03 due to weak EU inflation statistics.
This morning, the market’s primary concerns will be the Euro and November’s inflation figures. What interpretation of the facts may the FX market make? According to Commerzbank experts, a negative surprise may push the EUR/USD rate as low as 1.03.
“If the statistics come below forecasts, the likelihood of a rate increase in December may decline, which would be harmful to the euro. A decline in the direction of 1.03 is conceivable.
“If the data exceeds market expectations, this is likely to help the hawks on the ECB board who have already been pretty vocal over the previous few days and have prompted the market to trend more towards a 75bp step again, which would strengthen the Euro,” says the author.
“Surprisingly strong European inflation statistics coupled with a US labor market report (ADP index issued today, labor market report on Friday) that may suggest initial indications of a deceleration may push EUR/USD well over 1.04 again.”
GBP/USD may touch 1.1800 as Powell’s speech may boost the US Dollar – ING
Tuesday’s GBP/USD closing rate was below 1.2000. According to ING experts, the pair may attempt to break beyond the 1.1800 mark as Fed Chair Jerome Powell’s speech may strengthen the dollar.
“Bank of England Governor Andrew Bailey’s testimony yesterday didn’t generate any news that affected the market. Chief Economist Huw Pill will speak to us today; his previous opposition to a 75 bps boost may help to temper BoE rate expectations.
As Powell’s speech could bolster the dollar today, the cable is set to test 1.1800.
USD/JPY stays stable above the mid-138.00s, although the upside remains limited due to the weakening USD.
The USD/JPY pair encounters resistance at the 139.00 level and fails to benefit from its slight intraday increase on Wednesday. In the first hour of the European session, spot prices reach a new daily low before rising again over the mid-138.00s.
A major factor operating as a headwind for the USD/JPY pair is the US Dollar, which is still on the back foot despite a slight decline in US Treasury bond rates. Investors are confident that the US central bank would moderate the pace of its policy tightening despite the recent hawkish comments by Federal Reserve governors. A modest 50 bps Fed rate increase in December has already been wholly priced into the markets, which is expected to put pressure on US bond rates and the greenback.
In addition, concerns over the deteriorating COVID-19 scenario cause some haven flows to the Japanese Yen, which helps to limit the USD/JPY pair. The Bank of Japan (BoJ), which continues to weaken the JPY, has taken a more dovish posture, cushioning the downside. BoJ Governor Haruhiko Kuroda said earlier this month that the bank would steadily continue its monetary easing to boost the economy and reach the 2% inflation objective. Contrarily, it is commonly anticipated that the Fed would raise borrowing prices to confront persistently rising inflation.
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