In this article, we have covered the highlights of global market news about the AUD/USD, NZD/USD, GBP/USD and USD/JPY.
AUD/USD eases off a one-week high, and any decline is restricted given a lower US dollar.
After retesting the high of November 15–16 in the 0.6780s, the AUD/USD pair fails to build on its gains over the previous three trading sessions and falls from a one-week high reached earlier this Friday. The pair is trading around the mid-0.6700s and has been doing so during the early European session. However, any further decline is unlikely.
The current uptick in market optimism is restrained by concerns about the deteriorating COVID-19 situation in China, which is terrible news for the risk-averse Australian dollar. China implemented stringent restrictions in several important cities after a record-high increase in daily COVID-19 cases. As a result, worries of a future downturn in economic activity increase, and investors’ interest in assets seen as higher risk decreases.
However, the underlying pessimistic attitude against the US Dollar keeps the downside for the AUD/USD pair cushioned, at least temporarily. According to the minutes of the FOMC’s November meeting, which were made public on Wednesday, most decision-makers believed that a rate rise would soon be appropriate. As a result, the current decrease in US Treasury bond rates is extended, further weakening the US dollar.
NZD/USD: Higher interest rates may not be enough to drive the Kiwi – ANZ
With higher rates as support, the NZD/USD has overcome the crucial 0.6235 resistance level and now seems stable. However, aggressive Fed language should be avoided, warn ANZ Bank analysts.
Uncertainty still exists. “We do believe that higher interest rates and the RBNZ’s hawkish posture are, on balance, good for the Kiwi. However, newspapers are awash with recession talk, which of course carries the danger that unfavorable sentiment begins to feed on itself.”
The major worldwide question is how the USD would react to the possibility of the Fed pausing the pace of rises but perhaps raising the terminal rate. Does it encourage USD weakness or support it? Therefore, ambiguity persists.
GBP/USD is steady around the 1.2100 level, close below Thursday’s multi-month high.
The GBP/USD pair has consolidated this week’s strong climb up to the highest level since August 12 and is expected to fluctuate in a tight zone into the early European session on Friday. The pair is trading at the round number of 1.2100 and is still very close to a technical indicator known as the 200-day Simple Moving Average (SMA).
The US Dollar continues to be a headwind for the GBP/USD pair as it fails to establish real momentum and hovers just above the monthly low. The FOMC meeting minutes dovish judgment, made public on Wednesday, keeps US Treasury bonds’ rates down. The safe-haven greenback is seen to be under attack as a result of this and an overall upbeat atmosphere in the equities markets.
On the other side, the British pound is supported by the recent decrease in UK government bond yields. As a result of the UK’s financial situation improving, the Bank of England should be able to keep hiking borrowing prices to control inflation. Combining the aforementioned fundamental elements increases the likelihood that the GBP/USD pair will continue to appreciate shortly.
Nevertheless, given the UK’s dismal economic outlook, traders could be reluctant to make bold, optimistic wagers. Recall that the UK Office for Budget Responsibility (OBR) predicted a 1.4% decline in the UK GDP in 2019 compared to a rise of 1.8% predicted in March. This might limit gains for the GBP/USD pair due to lower trading volumes.
In the absence of pertinent market-moving data announcements from the UK, spot prices are on course to post increases for the third consecutive week. The Prelim Q3 GDP report, Core PCE Price Index (the Fed’s preferred inflation indicator), and the much-awaited monthly employment numbers, often referred to as NFP—all of which will be released next week—will now take front stage in the market.
USD/JPY finds support at 138.50 as the US Dollar rebounds, and Tokyo inflation rises.
In the early European session, the USD/JPY pair creates a cushion around the critical support level of 138.50. The USD/JPY pair has also increased a little due to signs of improvement in the USD Index (DXY). The US Dollar has made up all of its morning losses and is anticipated to scare off the following risk-on solid profile. The bias is still in favor of risky assets, however.
The S&P500 futures market is acting like investors are just starting to trade again following Thanksgiving Day’s holiday session. The 10-year US Treasury bond returns have decreased even further, to 3.65%, as the likelihood that the Federal Reserve (Fed) would maintain its December monetary policy meeting rate rise of 75 basis points (bps) has drastically decreased.
If the Fed decided to cut down the rate at which it raised interest rates, investors would choose to put their money in US government bonds. The likelihood of an interest rate increase slowing down is increasing as inflationary pressures have begun to wane and financial dangers need caution. As the inflation rate is still significantly below the desired rate of 2%, Fed Chair Jerome Powell is anticipated to keep interest rates from falling and may switch to a 50 basis point rate rise structure.
The headline Consumer Price Index (CPI) in Tokyo has increased to 3.8% from the consensus estimate of 3.6% on the Japanese currency front. While core CPI has increased to 2.5% from the expected 2.1%, According to Bloomberg, Tokyo’s inflation has exceeded expectations to reach its most robust rate since 1982. This acceleration signals that following months of currency weakening and high energy prices, the statewide price increase will also accelerate in November.
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