Forex Today – Asian Session: US Dollar at 7-Month Low

What you need to know for January 25

The dollar index bottomed around 102, near levels not seen since May 2022, as worries about a US recession and prospects for a less aggressive Federal Reserve scared off dollar investors. . This caused a lot of volatility in the day, both in commodities and in the currency market. The price of gold in particular soared while the Euro rose on hawkish comments from European central bankers.

The Federal Oenes Market Committee is in its suspension period while investors believe that the central bank will raise rates by just 25 basis points at the February meeting, where the main focus will be on the tone of the president of the Fed, Powell, around the level of “appropriately restrictive” interest rates. Fed funds futures have largely ruled out any possibility of the Fed raising 50 basis points next month and have progressively cut the likely top rate to 4.75%-5.0%, from 4.25%- 4.50% current.

Meanwhile, the hawks in the ECB Governing Council have called for a 50 basis point rate hike. The price of the euro reached $1.0927 against the dollar, which is depreciating, and reached its highest level since April of last year. The Euro Stoxx 50 rose 0.8%.

In relative terms, the US dollar performed quite well against the Japanese yen after the Bank of Japan (BOJ) defied pressure from the markets and backtracked on its ultra-loose bond policy last week. The USD/JPY pair rose to 130.88, but remains between last week’s range of 127.22 and 131.58.

Sterling came under pressure to seven-month highs against the dollar, despite the latest data showing the UK economy was performing better than feared. However, the bears jumped on the bandwagon and drove the British pound to a low of 1.2323.

The loonie remained afloat as investors refrained from making big bets ahead of the Bank of Canada’s interest rate decision, balancing around 1.3380 to the dollar and easing back from its strongest intraday level since Jan. 13. at 1.3343.

In terms of commodities and cryptocurrencies, the price of Oil fell with WTI shedding 0.2% to $81.5/bbl. However, the main volatility in the complex came with the price of gold, which was largely unchanged at $1,927.4/oz at the end of the day, but trading within a wide range of $1,911-$1,935 per ounce. ounce. Meanwhile, bitcoin, BTCUSD was little changed on the day at $22,849, stabilizing after jumping around a third in value since early January. There are no major events on the Asian calendar on Tuesday.