Things to watch out for on Thursday, January 5:
The US dollar reversed course on Wednesday and fell sharply in the currency market. However, the losses were mixed, with the Australian dollar among the best performers and the euro at the bottom of the list.
In fact, the news from china and affecting Australia were the initial catalyst for the US dollar sell-off. The news indicated that China’s National Development and Reform Commission discussed plans to partially lift the ban on importing Australian coal after two years of conflict. Imports were halted in mid-2020 after Australia joined other nations in launching an investigation into the origins of COVID-19, drawing the ire of China, which imposed bans on multiple Australian products. Based on talks in the markets, coal imports could resume as early as April 1.
Another factor that weighed on the dollar came from Japan, since the Bank Japan tried to lower the yield on government bonds. Governor Haruhiko Kuroda signaled that policy makers would continue to ease monetary policy to meet their inflation target.
Global yields fell, adding pressure on the greenback as news from Australia and Japan weighed on local yields while dragging their foreign counterparts lower.
The managing director of International Monetary Fund (IMF) stated that a third of world economies could enter recession in 2023.
Sentiment continues to revolve around China’s economic progress. On the one hand, market agents are optimistic that the country will resume growth after abandoning the policy of empty space. But on the other, many expect that recovery to be a long and bumpy road.
In the afternoon, the FOMC published the Minutes of its last meeting. The paper showed that policy makers remain concerned about inflation risks and, while welcoming the easing of price pressures in October and November, continue to make monetary policy decisions based on price pressures.
Most participants noted that upside risks to inflation remain a key factor in shaping the outlook for monetary policy. Some officials believe inflation risks could be more persistent, while a couple of officials think risks are more balanced. Finally, there are no clues as to how much Fed officials plan to raise interest rates at their next meeting.
The news pulled stocks from their intraday highs and fueled speculation that US officials will continue the aggressive tightening path.
The EUR/USD pair struggled to hold the 1.0600 threshold late in the day as the shared currency remains among the dollar’s weakest rivals.
GBP/USD returned to its comfort zone around 1.2050, little changed on a weekly basis. Fears of a UK recession undermined demand for the pound sterling against a backdrop of negative real GDP.
Commodity-linked currencies led the gains against the dollar, with the AUD rallying more than 150 points. AUD/USD is now trading around 0.6830, weighed down by easing on Wall Street. The USD/CAD, for its part, is trading around 1.3500, not far from an intraday low around 1.3476.
The USD/JPY pair advanced about 200 points during US trading hours to end the day around 132.60. The pair rallied after the release of the US ISM manufacturing PMI and rising government bond yields.
Crude oil prices continued to fall on Wednesday on concerns about Chinese demand. WTI fell in trading to $72.90 a barrel. On the one hand, the raw material was affected by fears of a reduction in Chinese demand, and later fell due to the easing of US indices.
Gold is trading around $1,851, after reaching a fresh six-month high of $1,865.12.
US Treasury yields fell: the 10-year yield is currently around 3.70%, down 8 basis points, and the 2-year yield is trading at 4.38%, down 2 basis points.
The UK’s National Crime Agency is gearing up to combat fraud with a new cryptocurrency unit.
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Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
