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There is a predominant trend of strengthening demand for the U.S. dollar
robustly propelling the USD/JPY exchange rate into the 151-yen range.
“In the current New York foreign exchange market, there is a predominant trend of strengthening demand for the U.S. dollar, robustly propelling the USD/JPY exchange rate into the 151-yen range”
This notable shift has been significantly influenced by the statements made by Federal Reserve Chair Powell during an IMF discussion this afternoon. Powell articulated, “I am not convinced we have tightened sufficiently,” leading to an adverse reaction in the U.S. stock market. Furthermore, he emphasized, “If deemed appropriate, we will not hesitate to implement additional rate hikes.”
Despite the recent dovish tone that permeated the market after the latest FOMC meeting, Powell’s remarks today injected a sobering perspective into that sentiment. The increase in U.S. bond yields following the 30-year bond auction later in the day further reinforced the resurgence of dollar buying.
The primary focus now centers on the vicinity of the year-to-date high, approximately 151.70 yen, recorded on October 31.
In the Euro/Dollar landscape today, there was a noticeable rebound during the New York session, bringing the exchange rate back into the 1.07-dollar range. A similar pattern was discerned in the preceding New York session, indicating an overall absence of clear directional momentum.
The Euro/Dollar has been consolidating around 1.0660 dollars. Over the past few days, it has struggled to break free from the range between 1.0650 and 1.07 dollars, awaiting a catalyst for the next market move. While a breakout in either direction from these levels could signal an extended move, today’s market dynamics hint at a potential inclination towards testing the downside.
On the flip side, the Pound/Dollar experienced a decline, reaching the mid-1.22-dollar range. This week has witnessed the continuation of a bearish trend, undoing a substantial portion of the gains achieved after last week’s release of U.S. employment statistics. The present position of the 21-day moving average around 1.22 dollars is now identified as an immediate downside target.
Within the market discourse, there is a growing consensus that the Bank of England has concluded its interest rate hike campaign and is now leaning towards rate cuts. Despite relatively elevated inflation in the UK compared to the U.S. and the Eurozone, uncertainties surrounding the future economic outlook are dampening expectations of additional rate hikes by the Bank of England. The Bank anticipates that October’s Consumer Price Index (CPI) will fall below 5%.
Conversely, the preliminary GDP release for the third quarter in the UK, scheduled for tomorrow, is expected to reflect a negative growth of 0.1% compared to the previous quarter. A lackluster momentum and several transient factors are perceived as hindrances to growth. In such a scenario, the monthly GDP for September is predicted to either remain unchanged or register a 0.1% decline. Considering the contraction in September’s UK PMI and a notable decrease in retail sales, this forecast is considered judicious.
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