The United States Dollar is consolidating a bit weaker across the board this morning against the G10, continuing last week’s trend ahead of the Federal Reserve policy decision on Wednesday.
Overview
A highly sensitive market to any development amidst a slew of global data points pushed volatility high throughout last week, though most currency pairs continued to trade within recent ranges. The high-volatility trend continues this morning and looks set to be a common thread once again this week ahead of both the Fed’s meeting and US jobs data due out Friday morning.
The biggest story over the weekend, obviously, comes from Japan as it appears Japanese currency authorities may have finally intervened on behalf of the flailing currency. After very briefly touching its weakest point against USD since 1990, JPY rebounded sharply and gained more than three percent from its lows at one point, currently sitting at 1.25% stronger against USD since the beginning of Asian session trading yesterday evening. This marks JPY’s biggest intraday range since December of 2022. Japan’s top currency official, Masato Kanda, declined to comment ‘for now’ on speculation that the government had boosted the currency and said they would not confirm any moves until the end of May. Nevertheless, several news outlets have reported that the overnight moves were, in fact, an intervention from the Japanese government. Japanese local trading was also closed Monday for a public holiday, likely exacerbating currency reactivity in a thin market.
Any intervention, if that is, in fact, what happened, may end up being for naught if Fed Chair Jerome Powell completes a more hawkish pivot at his press conference after the Fed’s policy meeting Wednesday afternoon. Recent data points have shown that US progress on inflation may have stalled and could require more strength from Powell on a ‘higher-for-longer’ message to convince markets the Fed continues to be up to the task of managing prices. Notably, Chicago Fed President Austin Goolsbee released comments during the blackout period that put pressure on his fellow voting members to complete a hawkish turn, but it remains to be seen the tone Powell strikes on Wednesday in the face of a weak GDP print last week.
What to Watch Today…
- Eurozone GDP, Tuesday
- Mexico GDP, Tuesday
- FOMC Policy Decision, Wednesday 2 PM
- US Nonfarm Payrolls, Friday 8:30 AM
- Monex USA Online is always open.
EUR ⇑
Though the global focus is heavily on JPY this morning, the single currency has thus far managed to eke out a small gain against USD and is taking its recent gains into a third straight week. Though today’s move is more driven by a touch of broad dollar weakness, several Eurozone nations released their preliminary CPI figures for April. Germany, Europe’s largest economy, showed a small uptick in its annualized inflation rate, which could help to set the stage for some hawkish pivot from the European Central Bank, not to be outdone by the Fed this week.
AUD ⇑
The Australian Dollar strengthened against the USD for a sixth straight session on the heels of the Japanese Yen’s wild overnight move that translated into Dollar weakness against most Asian and Antipodean currencies. China’s continued efforts to stem losses on CNY are also keeping AUD afloat, but the primary driver of AUD’s outperformance as of late is the constant assessment of interest rate differentials around the world. As the Fed could make its own hawkish pivot Wednesday, expectations for the Reserve Bank of Australia have shifted as well – markets are no longer convinced the RBA will cut interest rates this year at all.
