Softer US Dollar ahead of inflation, BoJ talks weigh on USDJPY

Markets portray the typical pre-data inaction during early Thursday. However, the softer US Treasury bond yields join recently dovish Fed policymakers’ remarks to weigh on the US Dollar.

The same joins talks of the Bank of Japan’s exit from the easy money policy to propel the JPY across the board, which in turn drowned the USDJPY price.

On the other hand, China’s firmer inflation data and upbeat Australia Trade Balance failed to help AUDUSD and NZDUSD as bulls step back in anticipation of softer US CPI. Further, USDCAD is on the same line amid downbeat oil prices whereas EURUSD and GBPUSD struggle for clear directions.

Elsewhere, Gold price remain firmer around an eight-month high but Brent oil failed to keep the gains after rising the most in two months the previous day.

BTCUSD refreshes monthly high while ETHUSD jumped to the nine-week top as broad US Dollar weakness joins a sigh of relief by the crypto traders.

Following are the latest moves of the key assets:

• Brent oil buyers take a breather at one-week high, mostly sluggish below $83.00.
• Gold manages to remain firmer around eight-month high despite having multiple hurdles below $1,900.
• USD Index returns to the bear’s radar while printing mild losses near 103.10.
• Wall Street closed in the green but stocks in the Asia-Pacific region traded mixed. However, equities in Europe and the UK are on the positive side by the press time.
• BTCUSD and ETHUSD remain firmer at multi-day highs $18,300 and $1,400 in that order.

All against US Dollar

Be it the Fed policymakers’ resistance to being hawkish or the recently downbeat US data, not to forget receding haven demand due to China, everything seems to weigh on the US Dollar as the risk-on mood dominates during the first month of 2023. On the same line could be more hawkish comments from the ECB governing council members and talks of an end to the BoJ’s ultra-easy monetary policy.

The same could be considered drowning the US Treasury bond yields and helping the commodities, as well as equities, as market players await today’s US inflation data.

On a different page, China’s firmer CPI failed to supersede another negative print of the PPI and appeared to lack the force to extend the upbeat sentiment. It should be noted that Australia’s upbeat trade numbers and a jump in New Zealand building permits also couldn’t impress the optimists as they brace for the key data.

Though, Gold is on the front foot as China propels the buying spree, together with India, whereas the softer US Dollar adds strength to the bullion’s upside. Additionally, Brent oil prices also grind higher, despite posting mild losses of late, amid hopes of more energy demand from Asia.

Cryptocurrencies portray a surprise upside even as regulatory fears loom. The reason could be linked to a sigh of relief that the worst from the FTX fiasco is over, for now.

• Strong buy: GBPUSD
• Strong sell: ETHUSD, USDJPY
• Buy: USD Index, USDCAD, Nasdaq, EURUSD
• Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

Nothing more important than the US CPI

Although multiple central bankers are up for speaking and could offer notable moves, the US Consumer Price Index (CPI) for December will be crucial for the markets amid talks of easy rate hikes and policy pivot. Should the US inflation drops more than expected, the US Dollar could slump to the 2022 low and allow commodities, as well as equities, to extend the latest north-run.

May the trading luck be with you!