The dollar took a wild ride to nowhere on Thursday, tumbling after the Fed announced a well-telegraphed shift to average inflation targeting nL1N2FT0PR, then surging with Treasury yields when political talks raised hopes for reinstatement of pandemic fiscal relief nL1N2FT162, since dimmed nW1N2FG061.
EUR/USD returned near flat after almost reaching last week’s low of 1.17545 on EBS when 10-year Treasury yields surged to two-month highs on disappointment with the lack of details about which new tools the Fed would employ to lift average inflation rates and employment.
Though revived fiscal relief hopes also underpinned Treasury yields and the dollar, House Speaker Nancy Pelosi’s comments nW1N2D301K triggered an afternoon pullback in U.S. stocks.
Weekly jobless claims highlighted the long road to restoring pre-pandemic labor market vitality, and perhaps even longer journey to attain loftier Fed employment goals after it acknowledged the flattened Phillips curve and broader dispersion of economic benefits from a tighter the job market.
After hitting a six-session high and four-session low, EUR/USD was little changed on the day and still consolidating its overbought and speculative-driven uptrend, holding above the pivotal 30-day moving average at 1.1756.
The Paris mask mandate highlighted expanding COVID-19 outbreaks in parts of the euro zone nL8N2FT2Q8, in contrast to falling U.S. case rates nL1N2FT1O9.
The haven yen was a stand-out loser nL1N2FT20S, with USD/JPY rebounding to probe key 55-DMA resistance that has plagued bulls all month, as Treasury-JGB yield spreads surged.
A close above that average, at 106.62, would open the way to retest August’s 107.05 high by the 100-week moving average nL1N2FT19C.
Global risk gauge AUD/JPY broke out above its rising top after strong Chinese industrial profits, which bode well for Australian exports to China.
Falling Australian COVID-19 cases and expectations the Fed will keep feeding the global asset inflation trend helped.
The cross has major technical targets by 80 nL1N2FT1OL.
After reaching its Dec.
31 swing high at 1.3284 GBP/USD fell back to flat.
Little notice seemed to be given to the dour CBI services employment data nL8N2FS4Q1 or the highest UK COVID-19 cases since June 12 nS8N2F708F.
High-beta and emerging markets currencies put in diverse performances, while rising Treasury yields kept gold and silver under wraps.
WTI struggled after Hurricane Laura made landfall nL1N2FT1BA.
Friday brings U.S. personal income, consumption and the core PCE the Fed tracks for inflation, as well as Chicago PMI.
Month-end flows, Fed fall-out and fiscal relief views could upstage those reports.
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