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Jan 24 - 03:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Up But Dollar Off Lows After US PMIs Beat

By Randolph Donney  —  Jan 24 - 01:35 PM

The dollar index fell 0.45% amid risk-on flows following another China stimulus move, led by USD/JPY's dive as JGB yields rose sharply in a delayed reaction to the BoJ's somewhat hawkish meeting on Tuesday and decent Japandata.

However, U.S. flash PMI beats lifted Treasury yields, helping the dollar off its lows.

EUR/USD rose 0.38%, but was closer to 1.09 after a 1.0930 high hit before the U.S. PMIs beat.

The impact of the U.S. manufacturing and service sector readings beating forecast by 2.4 and 1.9, respectively, was slightly tempered by the prices received index cooling to 51.4 to its lowest reading since May 2020, down from 54.8 in December.

Dollar gains from the reversal of earlier Treasury yield losses were muted by the continued risk-on rise to new record highs in the S&P 500.

The focus now shifts to hard U.S. data ahead of next week's Fed meeting.
On Thursday, Q4 GDP and jobless claims are the main events, followed by core PCE, income and spending on Friday.
There are also the post-ECB meeting events on Thursday for hints of when its first rate cut is likely, now heavily favored for April.

Also on Friday Tokyo CPI data will be perused amid the heightened BoJ rate hike speculation and 10bp surge in 10-year JGB yields on Wednesday.
At this stage, April's BoJ meeting remains the earliest likely rate hike venue.

That as futures are back to modestly favoring a March Fed rate cut.

USD/JPY fell 0.65%, but was above the 146.65 intraday lows by the tenkan line due to the PMI-led rebound in Treasury yields.
A close below the tenkan after Thursday and Friday's event risks would suggest the December-January recovery of the bulk of the November-December plunge from 2022/23's 151.94/92 32-year highs was a completed correction.

Sterling rose 0.4%, getting added support from above-forecast UK flash PMIs, but a daily range entirely above December-January highs by 1.2800 is needed to have a go at 2023's 1.3144 highs.
The BoE is not expected to cut rates until June and by less than 1% this year.

USD/CAD rose 0.27%, with market still unsure after the BoC meeting whether its first rate cut will be in April or June.

USD/CNY fell 0.29%, with the offshore yuan down 0.1% following the PBoC's unexpected RRR cut.

Aussie rose 0.22%, trailing the broader risk-on USD pullback.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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