Forex Today: Yen Rallies in Troubled Waters Awaiting Fed, SNB, BOE and PMIs

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Here’s what to know for next week:

Wall Street indices closed higher a volatile week in which traders navigate troubled waters. The Nasdaq gained more than 4%, in a bumpy ride. The VIX moderated, rising around 2% on the week, but is up 25% from where it was a few months ago. Concern for banks once again dominated the evolution of prices in financial markets. The European and Asian indices closed with weekly losses.

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What started a week ago with the Silicon Valley Bank (SVB), followed by Signature Bank, Credit Suisse (which remains on standby) and First Republic Bank. The turbulence in the financial markets will continue to be the protagonists in the coming days.

Next Wednesday, the Fed will probably raise interest rates by 25 basis points, despite the tensions in the markets. If the US central unit fearfully stands by on the current backdrop, it could trigger a shock to the markets that would offset the positive news of a pause in the tightening cycle. Clues about the future will be closely followed. China is expected to keep rates unchanged on Monday.

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The yields of the bonds of the US Treasuries posted the biggest weekly gains in years. Yields plunge around the world as investors flock to quality amid increasing odds of interest rate cuts before the end of the year. The Japanese yen was the biggest gainer among currencies in this context. USD/JPY lost almost 300 points.

He Dollar Index (DXY) posted the lowest weekly close in five weeks. Deteriorating market sentiment did not boost the dollar enough. If systemic risk fears start to dominate price action, the DXY could rally strongly.

He Bank The European Central Bank (ECB) raised interest rates by 50 basis points, as expected, and abandoned forward guidance. Economic data is being overshadowed by current events; however, next week’s PMIs will be the focus. French President Emmanuel Macron will face a vote of no confidence next week. The banking crisis weighed on the euro. EUR/GBP posted the lowest close since mid-January. EUR/USD ended the week flat looking for the 1.0700 area, after holding above the critical 1.0500 level.

Better than expected UK economic data provided support for the pound. GBP/USD posted the best weekly performance since mid-January, rising towards 1.2200. The Bank of England Monetary Policy Committee will meet next week. Market participants expect a final rate hike of 25 basis points.

He Swiss franc was affected by the banking chaos, which included Credit Suisse. The situation forced the Swiss National Bank (SNB) to take action. The SNB will announce its monetary policy decision on Thursday. February inflation in Switzerland surprised to the upside, but the current turmoil could steer the SNB away from another hike. Again USD/CHF rebounded strongly from near 0.9000, to the 20-week SMA. EUR/CHF rose from four-week lows, passing 0.9900.

USD/CAD ended the week at lows around 1.3700, but far from bottoming out. Next week, the key report for the Canadian economy will be the Consumer Price Index (CPI) for February, due to be released on Tuesday. The kiwi was among the most bullish stocks despite weak Q4 GDP data for New Zealand.

AUD/USD had the best week in months, helped by a weaker US dollar and also upbeat Australian jobs data.

He gold is another big winner, rising over a hundred dollars during the week, approaching $2,000. The yellow metal also benefits from Risk Aversion and Bond Yield Reversal.

Bitcoin it continues to move north and is back above $26,500 after rising more than 20% during the week.

It was a wild week for emerging market currencies. USD/MXN rose for the second week in a row. The pair erased a 10% yoy loss but failed to hold above 19.00.

Source: Fx Street

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