The dollar’s ascent to a 151.88 yen peak, the highest since October 2022, reflects changing expectations for U.S. Federal Reserve rate cuts.
The dollar’s rally continues, reaching levels against the yen not seen in over a year. This surge is underpinned by a reassessment of market expectations regarding potential rate cuts by the U.S. Federal Reserve in the upcoming year. Japanese Finance Minister Shunichi Suzuki’s commitment to monitor currency markets has had minimal immediate impact, as the yen remains down nearly 14% against the dollar throughout 2023.
Global Markets on Edge: U.S. Inflation Data’s Impending Impact on Currencies
As the dollar hits a one-year high, global traders brace for the repercussions of Tuesday’s U.S. inflation figures, crucial in shaping rate cut scenarios.
In the backdrop of a generally subdued atmosphere in global currency markets, the dollar’s recent surge has heightened anticipation ahead of the U.S. inflation data release scheduled for Tuesday. This market pause is deemed critical, offering a moment to assess whether the dollar’s peak aligns with the broader narrative of a decelerating U.S. economy.
Euro and Sterling Resilience Amidst Dollar Dominance
While the dollar asserts dominance, the euro stands firm at $1.0684, and Sterling sees a modest uptick at $1.2254 following a UK government reshuffle.
Despite the dollar’s prevailing strength, the euro manages to maintain its position at $1.0684. Simultaneously, Sterling experienced a slight uptick to $1.2254, a move attributed to shifts in the UK government’s internal structure. The reshuffling of key posts contributes to Sterling’s 0.2% gain against the euro.
Currency Outlook: Evaluating EUR/USD, AUD/USD, USD/JPY Ahead of U.S. Inflation Report
In-depth analysis of EUR/USD, AUD/USD, and USD/JPY as traders eagerly await the release of the U.S. October Consumer Price Index (CPI) data.
EUR/USD: Navigating the Bullish Trajectory
The EUR swap rates find themselves in a range trade below last week’s near two-month high at $1.0756. However, it comfortably resides above the critical 55-day simple moving average (SMA) at $1.0638. Analysts project the core inflation in October to remain at 4.1%, with the year-on-year (YoY) headline inflation expected to slip from 3.7% to 3.3%. The medium-term bullish trend remains intact as long as the 55-day SMA provides support.
To sustain the current gradual rise, a daily close above Thursday’s high at $1.0725 is crucial. Should the level at $1.0756 be surpassed, the next targets include the 200-day SMA at $1.0803 and the $1.0834 July low.
AUD/USD: Stabilizing After RBA’s Rate Hike
The AUD to USD conversion experienced a sell-off from its near three-month high at $0.6523 following the Reserve Bank of Australia’s (RBA) rate hike by 25 basis points to 4.35%. Analysts interpret this move as the final hike in the current cycle. The pair descended to last week’s low at $0.6339 but is now attempting to stabilize.
Immediate resistance lies at the 55-day SMA at $0.6392, coupled with the late October high at $0.6399. If overcome, the currency pair could target the October 11 high at $0.6445. Conversely, major support rests between the early and late October lows at $0.6286 to $0.6271.
USD/JPY: Proximity to the October Peak
Yen to Dollars has enjoyed a six-day upward trajectory, nearing its October peak at 151.95. This surge occurs against the backdrop of Japan‘s inflation nearing a three-year low. Recent data revealed that producer prices in Japan rose by 0.8% YoY in October, marking the lowest inflation since February 2021 and the tenth consecutive month of a slowdown.