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The market has stabilized, with the US dollar consolidating losses on Thursday. Risk appetite retreated, preventing the dollar index from falling further. Intraday gains of the American currency helped correct oversold conditions reached one day following Wednesday’s selloff.
The Federal Reserve’s hawkish language was much assessed and digested in ahead of the release of US inflation figures, with three rate hikes anticipated for this year and chances for a fourth hike if inflation persists. Similar chances have appeared for Fed balance sheet runoff before summer, resulting in the report triggering the opposite-than-usual reaction to skyrocketing prices pressure.
Economic Data
Just a few hours before the US session kicked off, the headline US Producer Price Index (PPI) rose at an annual pace of 9.7% in December, according to the latest report from the US Bureau of Labor Statistics on Thursday.
There were 230,000 initial claims for unemployment benefits in the US during the week ending 8 January, data published by the US Department of Labour revealed on Thursday. This data followed last week’s print of 207,000 and came in above consensus market expectations for 200,000.
Continued jobless claims fell to 1.559M in the week ending 1 January, the data showed, below expectations for a decline to 1.733M from 1.753M the week prior. The insured unemployment rate fell to 1.1% versus 1.3% last week.
Other Developments
Brexit keeps making it to the front line, with UK Trade Minister Truss stating that the UK hopes to have an agreement with the trans-pacific partnership Trade Bloc in the next few years.
The EUR/USD pair hit 1.1481, ending the day at around 1.1460. European Central Bank Vice President Luis de Guindos said the European economy is getting used to the coronavirus, adding that “perhaps inflation won’t be as transitory as forecast only some months ago,” although he expects it to stay below the ECB’s target in 2023 and 2024.
Commodity-linked currencies finished the day little changed. AUD/USD trades around 0.7290, while USDCAD stands at 1.2490.
The USD/JPY pair extended its slide and currently flirts with the 114.00 level. The GBP/USD pair extended gains to 1.3748, a fresh two month high, to finish the day with modest gains around 13715. The pound ignores headlines showing that UK’s Boris Johnson’s premiership is at risk amid breaking lockdown rules last year.
Gold retreated modestly, currently trading at around $1,820 a troy ounce, while crude oil prices were weighed by the soft tone of equities. WTI settled at $81.70 a barrel.
US government bond yields ticked higher but were unable to retain gains, ending the day barely up. Wall Street, on the other hand, was incapable of extending its gains, with most indexes posting modest intraday losses.
Friday will be quite a busy day, as the UK will publish its November Gross Domestic Product and Manufacturing Production for the same month, while the US will offer December Retail Sales and the preliminary estimate of the January Michigan Consumer Sentiment Index.
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