US Dollar Steady after Giving Up Initial Gains
The US dollar was stronger against its major trading partners early Friday, apart from giving back some of its large post-Federal Open Market Committee (FOMC) gains against the yen, as the schedule quiets down after a busy week of data releases and central bank meetings around the globe.
The markets are still digesting the accelerated taper by the Federal Reserve and the rate increase by the Bank of England this week as both squared up to fight rising inflation. The moves also suggest that both central banks see brighter days ahead amid the rise of the omicron variant.
The only US data scheduled for release on Friday are the breakdown of November employment and unemployment by state and the Kansas City Fed’s regional services sector data for December. Federal Reserve Governor Christopher Waller will speak on the economic outlook.
A quick summary of foreign exchange action heading into Friday shows that GBP-USD fell to 1.3290 from 1.3323 at the Thursday US close and from 1.3355 a day ago immediately after the Bank of England’s decision to raise interest rates.
While the omicron variant did not deter the BOE’s decision on Thursday, it may play into their thinking going forward.
The UK posted the largest daily increase in COVID cases since the start of the pandemic on Thursday and the government may need to aid businesses that could see lower-than-normal traffic in the upcoming holiday week.
UK retail sales and car registrations increased according to data released earlier Friday, but that was for November before the omicron variant took hold.
EUR-USD fell to 1.1317 from 1.1331 at the Thursday US close and is below the 1.1356 peak seen after the European Central Bank meeting.
The ECB announced that it will end its emergency bond purchases but maintain its other bond-buying program until the first rate increase, likely not until 2023. EU CPI data for November released earlier Friday showed no change from October and a 2.6% year-over-year rate, as expected.
As with the UK, COVID cases are still the main concern in Europe, and data for December are expected to show a slowdown in economic activity. USD-JPY fell to 113.3619 from 113.7144 at the Thursday US close prior to the Bank of Japan’s decision to leave rates unchanged as expected.
The pair was at 114.1779 a day ago as markets were still digesting the Federal Reserve’s relatively hawkish announcement on Wednesday, but the dollar moved back near pre-FOMC highs throughout the day on Thursday after positive US data.
USD-CAD rose to 1.2825 from 1.2775 at the Thursday US close and 1.2777 a day ago. A lack of major data on either side of the border will likely keep the pair relatively stable throughout the day. # US Dollar Steady after Giving Up Initial Gains
