Here’s what you need to know on Thursday, April 21:
The US dollar succumbed to gains on Wednesday, as US yields fell from multi-year highs, somewhat polishing the dollar’s investment appeal. The US Dollar Index (DXY) fell 0.6% to a low of 100.00 after reaching its highest levels since March 2020 above 101.00 on Tuesday, mainly affected by the drop in USD/JPY, as the yen received a belated respite.
USD/JPY fell just over 0.8% on the day to pull back below the 128.00 level, more than 1.2% below the multi-year intraday high of 129.40 hit earlier in the session. The pair is currently trading at 127.75, up 1.0% on the week and over 5.0% on the month, with little sign of a more significant yen rally, at least the BoJ signaling some sort of change in policy stance.
Non-US dollars were a notable outperformer on Wednesday. AUD/USD jumped around 1.0% to near 0.7450, NZD/USD gained around 1.0% to recover 0.6800 and test its 50-day moving average at 0.6813 and USD/CAD fell to two-week lows below 1.2500 .
The aggressive tone of the RBA minutes released earlier in the week, plus the spicy Canadian Consumer Price Inflation (CPI) figures released on Wednesday, likely helped boost the Australian dollar and the Canadian dollar. Meanwhile, kiwi traders are bracing for the release of Q1 2022 CPI figures in the upcoming Asian session.
Elsewhere, the euro and sterling also gained some ground against the US dollar counterpart, with decent industrial production numbers in the euro zone and aggressive comments from the ECB about a possible hike in July that could help the euro. But in truth, the main driver of EUR/USD’s 0.6% rally to the 1.0850 area and GBP/USD’s 0.5% rebound to above 1.3050 came from the USD side of the equation.
Currency strategists noted that while more profit-taking in the US dollar was possible, with the Federal Reserve now on autopilot to bring rates to neutral by the end of the year, the recent weakness is not likely to last. That suggests, at the very least, that the recent drop in USD/JPY and the rallies in EUR/USD and GBP/USD may not have much more room to run.
Fed Chairman Jerome Powell’s comments on Thursday will be closely scrutinized and are being signaled as having the potential to reignite the dollar’s recent bull run. ECB President Christine Lagarde and BoE Governor Andrew Bailey will also speak, so the central bank’s policy divergence will be a major FX market theme for the rest of the week.
Source: Fx Street
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