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The USDJPY currency pair experienced a decline to 133 yen
The April US Producer Price Index released today came in lower than anticipated.
“The USDJPY currency pair experienced a decline to 133 yen due to concerns over US regional banks”
The USDJPY currency pair experienced a decline to 133 yen due to concerns over US regional banks, resulting in a risk-averse market sentiment and a stronger yen. The April US Producer Price Index (PPI) released today came in lower than anticipated, lending support to expectations of an eventual cessation of interest rate hikes and potential rate cuts later in the year. The US Consumer Price Index (CPI) also reported a similar trend yesterday, adding to the overall negative sentiment towards US regional banks. Pacific West, a US regional bank, reported a significant decline in deposits, particularly on May 4th and 5th following reports of strategic options, including a sale. These factors have had a negative impact on the USDJPY exchange rate, compounded by reactions in the US stock market.
However, the currency pair experienced a rebound in the latter half of the day, climbing to the mid 134 yen level as the US stock market sell off paused. Market participants are focused on whether the 21 day moving average of 134.60 yen can be maintained and on potential movements in the coming days. There are indications that the market is anticipating four rate cuts by January next year. Despite this, economists have cautioned that even if the Federal Open Market Committee (FOMC) stops raising interest rates as expected in June, the Federal Reserve Board (FRB) may take a hawkish stance, which could catch the market off guard.
In the case of the EURUSD currency pair, a rebound was followed by selling pressure during New York trading hours, leading to a drop to around $1.09. The market is risk averse, and there is increasing selling pressure against the euro. Today’s downward trend has breached the 21 day moving average, which has heightened concerns about further downside risk.
However, there is high anticipation in the market for an interest rate hike by the European Central Bank (ECB). Christine Lagarde, the ECB President, who is visiting Japan for the G7 Finance Ministers and Central Bank Governors’ Meeting, emphasized the possibility of further interest rate hikes by stating that Efforts to contain high levels of inflation are not over. Today, the ECB published its monthly survey, which revealed a significant increase in consumer inflation expectations in the Eurozone in March. Some market participants speculate that the ECB may need to continue raising interest rates even in the summer. Inflation outlook for the next year has risen to 5% from 4.6% in February, while that for three years ahead has increased to 2.9% from 2.4% in the previous survey.
The GBPUSD currency pair also experienced a rebound followed by selling pressure, falling to the 1.24 dollar level. However, as widely expected, the Bank of England (BoE) raised interest rates by 0.25 percentage points today, leaving the possibility of future interest rate hikes open.
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