3 min to read
A noticeable trend of dollar selling has emerged
causing the USD/JPY pair to retreat to the mid-148 yen territory.
“In the current foreign exchange landscape, during the New York trading session, a noticeable trend of dollar selling has emerged”
A noticeable trend of dollar selling has emerged, causing the USD/JPY pair to retreat to the mid-148 yen territory. It’s essential to recognize that today’s activity in the New York forex market has been subdued due to Columbus Day, which is observed as a banking holiday.
However, during the preceding London trading hours, reports surfaced concerning a significant Hamas attack on Israel, resulting in a tragic toll of over 1,100 casualties. This unsettling development triggered risk aversion among investors, leading to an increased appetite for the US dollar as a safe-haven asset.
As the New York session unfolded, the market absorbed comments from notable figures like Jefferson, Vice-Chair of the Federal Reserve, and Logan, President of the Federal Reserve Bank of Dallas. Their statements conveyed a heightened sense of caution compared to their previous remarks, contributing to a resurgence in dollar selling.
In the backdrop of thin trading conditions, with limited market participants, the market exhibited heightened sensitivity to news and events. Additionally, despite robust US employment data released last week, the absence of an uptick in expectations regarding Federal Reserve rate hikes may be a factor influencing the dollar’s retracement. Short-term interest rate markets currently reflect an 85% probability of no rate adjustments at the upcoming November FOMC meeting, with a 74% probability of the status quo extending through December.
The EUR/USD currency pair initially dipped into the mid-1.05 dollar range during the London trading hours but experienced a rebound, climbing to approximately 1.0570 dollars as the New York session progressed. Nevertheless, it’s important to note that, despite strong US employment figures last week, the pair had previously retraced near the 1.06 dollar threshold and is currently consolidating around 1.0610 dollars, without reaching the critical 21-day moving average.
Today, the release of Germany’s industrial production figures for August revealed a fourth consecutive monthly decline on a month-on-month basis. Unless there is a significant resurgence in September’s data, concerns loom over the German economy’s potential contraction in the third quarter of 2023, potentially signaling an economic downturn in Germany next year.
In short-term financial markets, expectations for further rate hikes by the European Central Bank (ECB) have dissipated, while there is growing speculation of an early rate reduction in 2023.
The GBP/USD currency pair also staged a rebound during the New York session, reclaiming the 1.22 dollar level. Though a brief dip to around 1.2170 dollars occurred due to escalating tensions in the Middle East.
In recent days, GBP/USD has shown signs of a potential resurgence. Analysts, however, emphasize that, in addition to avoiding a decline to the year-to-date low of 1.1805 dollars, a weaker US dollar is a requisite for a sustained recovery towards the 1.23 dollar mark. However, the realization of such a scenario remains uncertain at this juncture.
This week, scheduled events and data releases in the UK, including a speech by Andrew Bailey, Governor of the Bank of England, may expose the British Pound to heightened volatility. Of particular interest is the annual conference of the Labour Party, as it deliberates on strategies to address the UK economy’s prevailing challenges. Any outcomes may have repercussions for the ongoing struggles in the British stock market.
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