FX is waiting for Powell’s speech
2023.01.10 02:55
FX is waiting for Powell’s speech
By Ray Johnson
Budrigannews.com – As markets awaited additional clues on U.S. monetary policy from an address by Federal Reserve Chair Jerome Powell later in the day, a rally in Asian currencies stalled on Tuesday. Additionally, concerns over a Chinese reopening grew amid rising COVID-19 cases in the country.
During an event in Sweden later in the day, Powell is expected to provide additional insight into the trajectory of U.S. interest rates and economic expansion.
Markets will keep an eye out for any shifts in the hawkish rhetoric of the Fed chair, especially given the growing evidence that inflation in the United States is falling. After regional markets were harmed by a sharp rise in interest rates in 2022, it is anticipated that the prospect of a Fed that is less hawkish will provide much relief to Asian markets.
China’s remained at a four-month high, rising 0.1 percent. In a clear shift away from three years of zero-COVID, China relaxed the majority of its anti-COVID measures and reopened its international borders in recent sessions.
However, despite the fact that the move is expected to eventually lead to an economic recovery, markets are wary of the nation’s near-term prospects because the country also experienced its worst COVID-19 outbreak yet as a result of the loosening of regulations.
After recent gains, other currencies that are exposed to China also slowed. The traded at a flat price, while the and each lost 1%.
Despite data showing that it increased more than anticipated in December, the was flat, likely signaling a similar pattern in national inflation.
The yen had risen toward the end of 2022 as more and more people believed that rising inflation would eventually force the Bank of Japan to reverse nearly a decade of extremely loose monetary policy.
The dollar regained some strength after some Fed officials said overnight that the central bank could raise interest rates beyond the 5% mark in 2023. However, the broad Asian currencies moved little.
After falling to a seven-month low, the and gained about 0.2 percent each. In response to growing expectations that the Fed will act soon, the dollar has fallen in recent months.
However, the central bank also indicated that it will likely maintain high interest rates for a longer period of time, causing uncertainty regarding the location of the U.S. borrowing costs’ peak. The trajectory of interest rates is likely to follow that of inflation as long as it continues to trend significantly higher than the range of the central bank’s target.
More Dollar is falling due to lack of demand
This week’s focus is also on December, which is due on Thursday. As economic activity slowed and the labor market also cooled, the reading is expected to show that price pressures eased further from the previous month.
