Forex

The pair made a strong start to the week and trades mixed after the UK employment report, as markets brace for CPI inflation updates from the US today and the UK tomorrow

A surprise announcement on Friday saw Japanese Prime Minister Kishida appoint Kazuo Ueda as the new BoJ governor. Ueda is a hawk relative to Mosayoshi Amamiya, the current deputy governor. However, his current leaning will probably have a dovish tilt with monetary policy shifting slowly.

The European Commission upgraded its 2023 growth forecast, but the pair is little changed, as markets brace for the latest CPI inflation data from the US on Tuesday

The markets have likely been running on the blowout non-farm employment change (NFP) released on 3rd Feb (orange dashed vertical), over any Fed communication. This suggests a heavy reliance on data and tomorrow we get the CPI at 1:30 pm GMT.

The US 10-yr real rate is pricing in less risk.

FXCM’s USDOLLAR is correlated with the real US 10-year yield, with a correlation coefficient of 78% (bottom chart). The real rate is adjusted for inflation and represents the true cost of borrowing. It helps participants make better informed decisions.

The central bank of Australia delivered another 0.25% rate increase, after the recent surge in inflation, pointing to more tightening in the upcoming months

The US economy added 517,000 jobs in January and unemployment dropped to new five-decades low, which strengthens the Fed’s view on the appropriate policy path and sent the pair lower on Friday

The US non-farm employment change data shows that 517K jobs were created in January. It was a surprise to the upside and exceeded the most optimistic forecast. The unemployment rate declined further to 3.4%.

NFP Live Trade - 03 February 2023

Both central banks raised their benchmark rates by another 0.5% as expected, but the Bank of England softened its messaging, whereas its European peer remained aggressive, despite some less hawkish elements