Noor Trends News, Technical Analysis, Educational Tools and Recommendations
On Wednesday, the dollar sharply edged lower across the board. However, losses were uneven, with the Australian dollar among the best performers and the Euro at the bottom of the list.
The International Monetary Fund’s managing director said a third of the world’s economies could slide into a recession in 2023.
EUR/USD struggles to retain the 1.0600 threshold at the end of the day, as the shared currency remains among the weakest USD rivals.
The GBP/USD pair returned to its comfort zone at around 1.2050, little changed on a weekly basis. Concerns about a UK recession undermined demand for the British Pound amid negative real GDP.
Commodity-linked currencies led the way against the greenback, with the AUD rallying over 150 pips. AUD/USD now trades at around 0.6830, weighed by easing Wall Street. The USD/CAD, on the other hand, trades at around 1.3500, not far from an intraday low of 1.3476.
Crude oil prices kept falling on Wednesday amid concerns about Chinese demand. WTI tumbled at trades at $72.90 a barrel. On the one hand, the commodity was affected by fears of reduced Chinese demand, later declining on the back of easing US indexes. Gold trades at around $1,851 after hitting a fresh six-month high of $1,865.12 per ounce, but gold is still trading higher the previous closing price at $1839.00.
US Treasury yields eased, with the 10-year note currently hovering at around 3.70%, down 8 bps on the day, and the 2-year note offering 4.38%, down 2 bps.
Key Developments
China’s news affect Australia. This news was the first l catalyst for the US dollar’s selloff. News indicated that the Chinese National Development and Reform Commission discussed plans to partially lift the ban on Australian coal imports after two years of conflict.
Imports were interrupted in mid-2020 after Australia joined other nations in launching an investigation into the origins of COVID-19, triggering China’s rage, which imposed bans on multiple Australian products. According to market talks, coal imports could resume as soon as April 1.
Another factor weighing on the US Dollar came from Japan. The BoJ attempted to lower government bond yields. Governor Haruhiko Kuroda noted that policymakers would continue to ease monetary policy to achieve their inflation goal.
Global yields were down, adding pressure on the American currency, as Australian and Japanese news affected local yields while dragging lower overseas counterparts.
Market sentiment continues to revolve around China’s economic progress. On the one hand, market players are optimistic the country will resume growth after dropping the zero-covid policy. But, on the other, many expect such recovery to be a long and bumpy road.
Releases, Economic Data
The FOMC released the Minutes of its latest meeting. The minutes indicated that US monetary policymakers are concerned about inflation risks, and while they welcomed easing price pressures in October and November, they are still taking monetary policy decisions on the base of price pressures.
Most participants noted the upside risks to inflation remain a key factor in shaping the monetary policy outlook. Some officials believe inflation risks could be more persistent, while a couple of officials think the risks are more balanced. Finally, there are no hints on how much Fed officials intend to raise interest rates at their next meeting.
The news pushed stocks off their intraday highs and fueled speculation that US officials will remain on the aggressive tightening path.
The USD/JPY pair advanced roughly 200 pips during US trading hours to end the day at around 132.60. The pair soared after a poor US ISM Manufacturing PMI and as US government bond yields jumped north. Business activity in the US manufacturing sector contracted for the second straight month in December with ISM’s Manufacturing PMI declining to 48.4 from 49 in November. This reading came in slightly below the market expectation of 48.5.
JOLTS Job Openings little changed at 10.45 million in November. The data published by the US Bureau of Labour Statistics, on Wednesday, indicated that the number of job openings on the last business day of November was 10.45 million, compared to 10.51 million in October and the market expectation of 10 million.
Also Read
