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Thursday was the day of robust data. Strong data, rate cut bets bolstered the US dollar again. Another positive set of results in US key indicators boosted the upside bias in the US dollar and underpinned the tighter-for-longer narrative around the Fed.
The same view seems to emerge around the ECB, where the Accounts of the December event left no room for any guess on the timing of interest rate cuts.
Another positive session for the greenback allowed the USD Index (DXY) to navigate the upper end of the recent range in the 103.60 region amidst modest gains, while auspicious prints from regional manufacturing surveys and firm data from the weekly labour market added to the sentiment surrounding a Fed’s rate cut in March.
EUR/USD remained on the defensive and flirted once again with yearly lows in the mid-1.0800s on the back of the dollar’s strength, despite the fact that the ECB Accounts made no mention of interest rate cuts. Absent data releases in the euro calendar on Friday, all the attention is expected to be on another speech by President C. Lagarde at the WEF in Davos.
GBP/USD briefly surpassed the 1.2700 barrier, ending Thursday’s session with decent gains despite another positive session in the greenback. Across the Channel, investors are expected to closely follow the release of Retail Sales for the month of December on Friday.
The USD/JPY pair had a volatile session on Thursday, closing the day in the vicinity of 148.00 after reaching multi-week highs close to 148.50 on Wednesday. The release of the December inflation data, which are supported by the Tertiary Industry Index for November, should be the focus of all attention on Friday.
Despite staying stuck in the multi-week bearish trend that has been in place since late December, the AUD/USD pair finally woke up and moved up to the 0.6570 region.
The buying pressure in the dollar, depressing readings from the home labour market, weak Chinese fundamentals, and a lack of upward momentum in the commodities space all continued to weigh on the Australian dollar. At the conclusion of the week, no data releases are planned for Down Under.
On Thursday, Gold and Silver both managed to achieve some equilibrium and show modest increases, offsetting some of the recent weakness.
The weekly drawdown in US crude oil stockpiles and geopolitical concerns sent WTI prices higher, building on the gains of the previous day and breaking through the $74.00 barrier per barrel. Since the start of the year, crude oil has continued to follow the consolidation trend.
The preliminary Michigan Consumer Sentiment indicator, Existing Home Sales, TIC Flows, and speeches by FOMC members M. Daly (San Francisco) and M. Barr (Board of Governors) will all be featured prominently on the US docket on Friday.
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