Kantox currency update: dollar strength wanes as risk aversion ebbs
The U.S dollar retreated on Monday after last week’s sharp rally, with stock markets bouncing up although the market remains cautious ahead of the release of the U.S. Consumer Prices Index, due on Wednesday, which could revive inflation concerns.
The euro trimmed losses in absence of relevant macroeconomic indicators and the pound ticked up from three-week lows, with the focus on the UK inflation data, which will be carefully observed after the Bank of England hinted to an interest rate hike over the coming months.
EUR/USD trying set a bottom at 1.2200. The euro reversal from 1.2525 highs last week found support on Friday at 1.2200, and the pair bounced up on Monday, favoured by an improvement on the market sentiment, to return to levels above 1.2300. At London market opening times, the EUR/USD is trading at 1.2315.
GBP/USD: attempting to pick up from 1.3765. The pound depreciated more than 3.5% over the last week, plunging from levels near 1.4300 to three-week lows at 1.3765, before ticking up on Monday, with all eyes on today’s Consumer Prices Index figures, which might determine the near term direction for the pound. At London market opening times, the GBP/USD is trading at 1.3985.
USD/JPY: dives to 5-month lows below 108.00. Japanese stock markets have opened with losses on Tuesday after a long weekend, souring market sentiment and strengthening the yen against its main peers, to push the dollar below 108.00 and nearing key support at 107.30. At London market opening times, the USD/JPY is trading at 107.70.
In the Calendar Today
At 09:30 GMT The focus today will be on the UK Consumer Prices Index. The Bank of England surprised the market last week with a hint to the possibility of another interest rate hike this year, and a strong inflation data will be a strong support for that plan, and might help the pound to shrug off recent weakness.
09:30 GMT UK: Consumer Prices Index (YoY) (Jan)
Previous: 3.0% Expected: 2.9%