Thursday Market Update: Risk Appetite High, USD Pressured
Here is what you need to know on Thursday, January 16:
Overview of Today’s Market Sentiment
Risk flows dominate early European trading, driving a subdued US Dollar (USD) and US Treasury bond yields. Investors remain optimistic due to renewed expectations of two interest rate cuts by the US Federal Reserve this year amidst tame inflation data.
US Inflation Data Fails to Impress
The US Consumer Price Index (CPI) saw a modest gain to an annual rate of 2.9% in December, aligning with forecasts. However, core CPI, which excludes volatile food and energy prices, rose by a lower-than-expected 3.2%, instead of 3.3%. Similarly, the Producer Price Index (PPI) lagged expectations, rising 3.3% in December against a forecast of 3.4% growth.
Favorable Market Sentiment Pushes USD Lower
Hopes for additional Chinese stimulus measures and diminishing concerns over potential trade tariffs under President Donald Trump contribute to a risk-on environment. This sentiment blunts USD’s appeal as a safe-haven currency.
FX Major Currency Unfavorability
In today’s session, major currencies did not fully benefit from risk-on sentiment and a weakening USD. Notably, the Australian Dollar (AUD) and Japanese Yen (JPY) emerged as the weakest across the FX market. AUD/USD currently approaches 0.6200 after peaking at 0.6250 in reaction to robust Australian employment figures. However, rising unemployment rates in Australia could lead to early rate cuts by the Reserve Bank of Australia (RBA).
JPY Initial Plunge Followed by USD/JPY Surge
USD/JPY experienced another tempestuous Asian session, starting with a sharp decline from 156.00 to 155.20. Speculation pointed toward a Bank of Japan (BoJ) interest rate hike in the coming week. Bloomberg cited unnamed sources indicating the BoJ’s intention to raise rates if markets do not suffer a major downturn after Trump’s inauguration. Following Bank of Japan Governor Kazuo Ueda’s commentary, USD/JPY buyers retook the 156.00 level.
Pound Sterling’s Soft Performance
The Pound Sterling remains inconsistent, causing GBP/USD to oscillate near 1.2200. Recent economic data, including UK Gross Domestic Product (GDP) and Industrial Production for November, fell short of expectations. Notably, GDP growth amounted to 0.1%, missing a +0.2% growth forecast. Additionally, Industrial and Manufacturing Production declined by 0.4% and 0.3%, respectively, in November, falling below market forecasts.
EUR/USD Trading with Caution
EUR/USD holds minor gains around 1.0300, propelled by an elevated market mood. Yet, further upside appears limited owing to dovish signals from the European Central Bank (ECB). Investors await ECB Policy Accounts from the December meeting and the release of US Retail Sales and Jobless Claims data.
USD/CAD Boosted by Oil Price Volatility
USD/CAD stays resilient above 1.4350 as oil prices consolidate recent gains pushing towards six-month highs. Despite oil tanking 0.45%, trading below $79 per barrel, USD/CAD benefits.
Gold Price Rally
Gold experiences a minor rebound, testing levels around $2,700 in the European session. This recovery follows a temporary dip to $2,690.
US Dollar PRICE Today
The table below showcases the percentage change in the US Dollar (USD) against other major currencies today. The USD is particularly weak against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.02% | 0.20% | -0.27% | 0.18% | 0.19% | 0.16% | -0.10% | |
| EUR | 0.02% | 0.22% | -0.24% | 0.20% | 0.21% | 0.18% | -0.08% | |
| GBP | -0.20% | -0.22% | -0.44% | -0.02% | -0.01% | -0.05% | -0.30% | |
| JPY | 0.27% | 0.24% | 0.44% | 0.42% | 0.43% | 0.35% | 0.14% | |
| CAD | -0.18% | -0.20% | 0.02% | -0.42% | 0.02% | -0.03% | -0.28% | |
| AUD | -0.19% | -0.21% | 0.01% | -0.43% | -0.02% | -0.03% | -0.29% | |
| NZD | -0.16% | -0.18% | 0.05% | -0.35% | 0.03% | 0.03% | -0.25% | |
| CHF | 0.10% | 0.08% | 0.30% | -0.14% | 0.28% | 0.29% | 0.25% |
This heat map offers percentage changes for major currencies against each other. USD (base) vs. JPY (quote) indicates a particular currency exchange rate. For example, choosing the US Dollar from the vertical column and moving horizontally to the Japanese Yen, the resulting percentage change signifies USD (base)/JPY (quote).
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