The euro is catching its breath on Friday after some sharp swings over the past two days. EUR/USD is trading quietly at the 1.09 line. Fed, ECB send euro on a wild ride This week’s central bank rate announcements sent the euro on a roller-coaster ride. The Fed’s 25-basis point hike pushed the euro higher by 1.16%, while the ECB hike of 50-bp sent the euro down by 0.76%. The end result is that the euro is back to where it started the week, just below the 1.09 line. The Fed rate decision sent the US dollar broadly lower, as investors were heartened by Jerome Powell saying that the disinflation process had begun and that he expected another couple of rate hikes before the current … [Read More...]

The New Zealand dollar has edged lower on Tuesday. In the North American session, NZD/USD is trading at 0.6462, down 0.10%. Markets await New Zealand job data New Zealand releases the Q4 employment report later today. Unemployment is expected to tick lower to 3.2%, following a 3.3% reading in the third quarter. This would mark the lowest unemployment rate in over four decades. Employment change is projected to have climbed 0.7% in Q4, after a 1.3% gain in Q3. What will be particularly interesting is wage growth, which has been robust and may have jumped as much as 9% y/y in the private sector. Wage growth has been contributing to high inflation, which the Reserve Bank of New Zealand is determined to bring down. Inflation was … [Read More...]

The Japanese yen had an uneventful week and edged higher on Monday. USD/JPY is trading at 130.06 in the European session, up 0.18%. US PCE slows to 4.4% Last week wrapped up with Core PCE slowing to 4.4% in December, down from 4.7% a month earlier. However, the month-over-month reading showed a gain of 0.3%, after three straight declines. This means that it’s still too early to assume that inflation has peaked, and the annualized reading indicates that inflation is more than double the Fed’s target of 2%. The takeaway from this is that the Fed will likely remain aggressive with its rate policy even though there are clear signs that the economy is slowing down. The Fed holds its policy meeting on … [Read More...]

The Canadian dollar is almost unchanged on Wednesday, trading at 1.3373 in the European session. BoC expected to hike by 25 bp The Bank of Canada is expected to raise rates by 25 basis points at today’s meeting, the first of the year, which would bring the cash rate to 4.50%. The BoC has been aggressive, raising rates by some 400 basis points in the current rate-tightening cycle which began in March 2022. At the last meeting, BoC Governor Macklem had said that the BoC would likely pause in January, barring a major change in the data. So what has changed? Inflation levels have fallen in line with BoC projections, but the labour market created a massive 100,000 new jobs in December, crushing the estimate of 7,000. The big question is whether … [Read More...]