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Feb 08 - 03:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Stays Above Supports, Yen Sold On Softer BoJ View

By Randolph Donney  —  Feb 08 - 02:00 PM

The dollar index rose 0.1%, primarily due to USD/JPY's 0.78% gain after BoJ Deputy Governor Shinichi Uchida reigned in expectations that a widely expected end to negative Japanese rates would usher in significant follow-on tightening.

The dollar also was briefly bolstered by jobless claims coming in a shade below forecast after bigger, unexpected increases the prior week.

Given the hot January employment and ISM services reports, this week's claims fit the Fed's guidance against aggressively pricing in rate cuts.
Futures show a 64% probability of a May cut and 116bp of easing this year.

Two- and 10-year Treasury yields rose 2.6bp and 5.6bp amid sharply higher crude oil prices.
That partly on hopes China will do more to boost growth and with no end in sight for Middle East and Red Sea shipping concerns.

EUR/USD was flat after earlier lows again found support by December and January's lows.
That despite ECB policymakers highlighting their uncertainty on the inflation outlook and the need to see more data before easing.

The ECB might also be hesitant to cut rates in April before the Fed is favored to on May 1.

Friday brings German final CPI and revisions to U.S. CPI ahead of Tuesday's January data, with core forecast again up 0.3% month-on-month and overall 0.2% versus 0.3%.
Core and overall inflation rates were at 3.9% and 3.4% in December, well above December's 2.9% core PCE.

USD/JPY's rallied above key hurdles at 149.14-20, backed by higher Treasury-JGB yields spreads, but a run at 150 may wait for U.S. CPI news that, if on the high side of forecasts, could also increase the risk of 2022/23's 32-year peaks at 151.94/92 being revisited.

Sterling fell 0.1%, but was well off Thursday's 1.2572 lows, though still below 1.2645, the midpoint of the 1.2772-5175 Friday-Monday plunge on hot U.S. data.
That plunge failed to breach December's lows.

BoE hawk Catherine Mann gave her reasons for voting for a rate hike at last week's meeting, while signs of recovery in the UK housing market helped send 2-year Gilts yields up 9bp.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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