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Market Update
No respite for the buck today, as the US dollar index continues to come under heavy downside pressure against a basket of top currencies on Wednesday and looks set to post a fourth-straight days of heavy losses.
The EURUSD pair, which makes up a significant portion of the US dollar index, is trading around the 1.2130 level, marking a gain of around 180 points from the lows of last week. It has been one-way travel for the euro after bulls staging a notable breakout above the 1.2060 level earlier this week.
Goldman Sachs has released a notable report this morning noting that they expect the EURUSD pair to trade at 1.2500 in three months, 1.2700 in six months, and finally 1.2800 within the next twelve months.
Asian stock markets saw a lively trading session as China and many Asian countries place bets ahead of start of the Lunar New Year holiday. The Shanghai Composite rose to a five-year high as the index received a boost from soft Chinese CPI figures.
Traders and investors started to place bets that Beijing will offer further monetary policy stimulus in order to get Chinese inflation up-to-speed after today’s big -0.3% monthly CPI miss. China’s CSI300 also moved to its highest trading levels in thirteen years earlier today.
The Nikkei 225 consolidated around all-time highs as the stronger Japanese yen weighed on the index. While Australia’ ASX 200 posted gains of +0.5% after Westpac Consumer Sentiment data beat expectations with a +1.9% headline reading for February.
Back to the foreign exchange market, the British pound is trading to fresh multi-year highs and is making real strides above the 1.3800 level. Sterling could go into hyperdrive if bulls cement another positive daily close above the 1.3800 handle.
The New Zealand dollar remains steady after Reserve Bank of New Zealand Governor Orr said that COVID-19 risks remain in place. Many analysts are expecting that the RBNZ will start to talk down the Kiwi at this month’s policy meeting.
Gold and silver continue to benefit from weakness in the US dollar index. Gold is holding-up around the $1,840 level and looks poised to move higher. Silver continues to hold above its 200-period moving average on the four-hour time frame and is trading between the $27.00 to $28.00 price range.
Upcoming News
The release of German CPI inflation headlines the economic docket during the European trading session. The majority of the trading action is likely to take place during the US session as the world’s largest economy releases the January CPI inflation report.
Sterling and Canadian dollar traders beware, Bank of England Governor Andrew Bailey is set to speak after the European session close, while Deputy Governor of the Bank of Canada’s Timothy Lane is also set to talk later today.
Without a doubt Federal Reserve Chair Jerome Powell scheduled speech later today will be the main on Wednesday. Expect plenty of market volatility and a continuation of greenback selling, stocks higher, and muted bond action if the FED Chair sticks to script later today.
