What you need to know on Wednesday 20 April:
The Japanese yen was battered on Tuesday as further upside in global bond yields exerted further upwards pressure on G10/Japan interest rate differentials, dampening the low-yielding safe-haven currency’s investment appeal. Needless to say, the yen was the worst-performing major G10 currency, with USD/JPY surging nearly 1.4% to the upper 128.00s, its highest levels since early 2002.
EUR/JPY, GBP/JPY and other major G10/JPY pairs also unsurprisingly saw sharp upside, with the former two rallying 1.5% and 1.3% respectively to multi-year highs in the upper-138.00s and mid-167.00s. Japanese politicians have been jawboning more and more in recent days about the negative impact of yen weakness, but until the BoJ budges from its ultra-dovish policy stance, the yen remains vulnerable to further losses. Remarks from BoJ Governor Haruhiko Kuroda earlier in the week suggested that the bank won’t be looking to change its policy stance any time soon.
Strength in USD/JPY helped lift the US Dollar Index above 101.00 for the first time since March 2020. Fed speak remained in the spotlight, with traders digesting the latest commentary from hawkish Fed’s James Bullard and more neutral Fed’s Charles Evans ahead of pivotal remarks from Fed Chair Jerome Powell later in the week.
EUR/USD and GBP/USD both traded broadly flat just under the 1.0800 level and near 1.3000 respectively, despite the return of normal European flows on the reopen of markets there after Monday’s closures for Easter holidays. Relevant fundamental updates, as well as updates relating to the Russo-Ukraine war, were few and far between on Tuesday, making for slow trading conditions.
Decent US housing data and in line with expected Canadian Housing Starts figures didn’t give the buck or loonie much to go off of. USD/CAD was modestly supported, however, by a sharp pullback in crude oil prices, reversing an earlier dip under 1.2600 to end the day closer to 1.2620. Ahead, loonie traders are bracing for the release of March Canadian Consumer Price Inflation figures on Wednesday.
Finally, the antipodes didn’t see too much excitement. The Aussie is a modest G10 outperformer in wake of Tuesday’s slightly hawkish RBA minutes release – the bank noted high expected inflationary pressures and said recent developments suggest an earlier rate lift-off. AUD/USD rebounded about 0.4% to the 0.7375 area, having bounced at its 50-Day Moving Average in the 0.7340s. NZD/USD, meanwhile, traded flat in the 0.6730 area and remained close to the more than one-month lows it struck on Monday just above 0.6700.
Focus during the upcoming Asia Pacific session will centre on the ongoing Covid-19 outbreak and lockdowns in China, as well as the Chinese fiscal and monetary response to the new disruptions to its economy.
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EUR/USD has accelerated its decline after the US opening, as fears are back. Several US institutes, Wells Fargo and S&P among other, downwardly revised growth forecasts, but expect inflation to remain high. Wall Street resumed its slump, wit the three major indexes sinking in the red.
The GBP/USD pair is under selling pressure, approaching the daily low posted after the release of UK inflation figures. US Treasury yields are down, as demand for safe-haven bonds returned.
XAUUSD could retest the weekly high, but bears are in charge. Gold hovers around $1,820, little changed on a daily basis for a fourth consecutive day. Markets participants are rushing to safety, leaving the metal confined to a tight intraday range.
Ethereum price is in a tough spot despite the recent crash and indicates that a further downtrend is on the cards. The case for a bullish trend will only be revived after ETH produces a higher high from a macro perspective.
Upstart Holdings (UPST) stock shot up 23.5% on Tuesday to $46.66 after Upstart's annual shareholder meeting affirmed shareholders' interests on two separate fronts.
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