Inflation data is the most important indicator that affects the central bank’s monetary policy.
Daily News: Wednesday, February 28
Let’s look at results with which we are coming to the end of the month.
- Yesterday Mr. Powel gave his first speech as Federal Reserve Chairman. The testimony was expectedly hawkish. The new chairman announced that the Fed will gradually increase rates. After Powell’s speech, the US dollar could strengthen and rise against major currencies. However, today we can see that the greenback is falling against some currencies again. Let’s look closer.
- The euro plunged after Powell’s speech. The EUR/USD pair broke the support at 1.2260 and closed at 1.2231. The break of the support is negatively influencing its possibilities. The next support is at 1.22. Today European inflation data will be released (12 MT time), so the euro has hope for support. If the CPI data is not good enough, it is not so much time until Italian parliamentary and German coalition elections (March 4). Maybe the positive news will support the euro.
- The yen is appreciating again. The BOJ announced a minor reduction of Japanese Government Bonds purchasing. It was just one change since February 23: 70b yen of bonds maturing in over 25 years vs 80b on February 23. The change is small, but it affected the USD/JPY pair. Currently, it is near 107, far from an important level of 106, but looking at the dynamics anything can happen.
- The pound is slightly declining, however, its position is unclear now. UK prime minister Teresa May and BOE Governor Mark Carney will give speeches on Friday, March 2. Teresa May will talk about Britain's post-Brexit relationship with the European Union. Mr. Carney will discuss the evolution of money and the emergence of cryptocurrencies. Such public speeches always affect currencies. So let’s look if they are enough optimistic to support the sterling.
- The Australian dollar is recovering. Tomorrow quarterly private capital expenditure will be announced. If actual data is higher than forecast, the Aussie will get a support, but the plunge was too big, so the Aussie needs more positive data.
- Stocks fell based on the hawkish Powell’s testimony. Tighter monetary policy and rate hikes led to the fall of the stock market.
- There are no changes in positions of other currencies. Important data is not anticipated anytime soon.
Although yesterday the US dollar index closed at the low level comparing to the daily movement, today it has been moving up again.
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