The dollar index eased slightly on Friday but the U.S. currency rallied versus the yen after much-stronger-than-forecast U.S. retail sales nAPN0AVCWF, while the pound also surged as investors focused on divergence in central bank policy expectations.
The retail sales report bolstered existing Fed tightening expectations, but with tapering and a fair amount of late-2022 rate hiking already discounted it provided little impetus for fresh dollar buying.
With the BOE seen well ahead of the Fed on the way to withdrawing pandemic stimulus measures, and the renewed global risk acceptance since Wednesday, the risk-sensitive GBP/USD gained 0.63% this week.
Meanwhile, the BOJ is not only seen maintaining its -10bp policy rate and zero target for JGB yields, but it is also expected to lower its GDP and inflation forecasts at its Oct.
27-28 meeting nL1N2RB0E4.
EUR/USD was marginally lower Friday, weighed down by falling Bund-Treasury yields spreads following the strong U.S. retail sales report and after further indications the ECB will be cautious about removing pandemic supports nL1N2RB1F6.
GBP/USD was up 0.6% nL1N2RB1AK and closer to the 100-DMA that capped September's recovery and the downtrend line from May and September highs, last at 1.3809-19.
GBP/JPY's 1.16% gain Friday highlighted the contrast between BOE and BOJ policy expectations, as well as improved risk-taking favoring the pound and hurting the haven yen.
GBP/JPY's nearly 3% surge this week cleared resistance dating back to 2008 with much broader price objectives possible if the pre-Brexit vote June 2016 high is cleared nL1N2RB1VQ.
USD/JPY was up 0.55%, with a 114.47 high on EBS just shy of 2018's peak and the 76.4% Fibo of the 2016-20 drop at 114.54/55 that has been the main technical target this month nL1N2RB1VQ.
While a logical place for an overbought market to at least consolidate, there is risk up to the mid-118.00s if 115 barrier options are cleared, exposing the short-gamma risk beyond there nL1N2RB149.
The yen is also beset by surging import costs due to pandemic related shortages and price rises, exacerbated by the currency's broad slide to multi-year lows and limited leeway for Japanese businesses to pass along to price-sensitive domestic customers.
Japan's dependence on foreign energy also makes it more vulnerable the multi-year highs in oil and natural gas than the U.S.
AUD/USD and USD/CAD consolidated some the recent dollar losses in pre-weekend profit-taking.
Bitcoin rallied more than 7% on hopes the SEC will allow futures-based ETF trading nL4N2RB0T4, rising above 60k nL1N2RB1FV and closing in on April's record high.
Ether gained about 2.6%, but is still below September's high.
An unexpected drop in the Michigan consumer sentiment reading for October nAQN04R39X provided a staid intro to a quiet upcoming week of U.S. data.
Initial October PMI readings on Friday might be the week's highlight.
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