After five straight days of losses across the board, the United States Dollar has stemmed its bleeding and leveled its losses this morning.
Overview
Starting the day at a slight gain against most major currencies, this is a reversal of the trend of the last week. Wednesday’s reaction to lower-than-expected CPI may have been overblown for USD, and the bond market has taken a bit of a reprieve this morning as well after Governor Christopher Waller of the Federal Reserve said he does expect the central bank will need to raise interest rates twice more after all. Though markets remain unconvinced of two more hikes, the Fed is clearly attempting to leave the door open.
Global risk sentiment seems to be less uncertain today as well, driving some weakness in traditional safe-haven currencies like CHF and JPY. China’s newfound willingness to aid its private companies, rather than just its public ones, is raising hopes that the nation’s economic recovery from its “zero-Covid” policy may have more room to go, boosting the mood of investors around the world.
The story for this week, regardless of today’s reversal, is of heavy dollar losses that we have been discussing since the beginning of this year. As the Fed begins to look toward the end of its tightening cycle, while many central banks will have to continue theirs, it’s likely USD will be on a steadily declining path through the end of this year.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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JPY ⇓
Japanese Yen, after its biggest bull rally since 2018, saw some downside this morning and lost a third of a percent against the USD. Bank of Japan officials are likely to raise their inflation forecast for this fiscal year above 2% but foresee a return to their 2% target the following year. Though the BoJ keeps threatening to adjust its ultra-loose monetary policy and scrap yield curve control, any major policy change is likely some way off.
AUD ⇓
The Australian and New Zealand Dollars, continuing their high-volatility trends of late, both slid against USD this morning. Major commodity prices dropped overnight; both oil and gold showed pricing losses leading into the morning session, giving some downside after the Antipodeans were on track for their best week in months against USD. The Reserve Bank of Australia yesterday named Michele Bullock as its new governor, taking over at the end of Philip Lowe’s seven-year term and injecting some uncertainty into the market.
