USDJPY slumps to multi-day low on dovish Fed signals

December starts with an upbeat mood as dovish comments from Fed Chair Jerome Powell joins the improvement of China’s covid conditions. 

With this, the USD Index remains pressured around a weekly low after posting the biggest monthly fall in 12 years. The same favored commodities and Antipodeans to remain firmer.

Gold prices approach November’s peak on crossing the key hurdle but Crude oil eased amid supply concerns.

USDJPY benefited from the US dollar’s weakness, as well as hawkish comments from BOJ policymaker, while the USDCAD occupied the other hand amid softer oil prices.

The risk-on mood helps leading cryptocurrencies to brace for the biggest weekly gain in six despite the downbeat performance in November and mild intraday losses.

Following are the latest moves of the key assets:

• Brent oil prints mild daily losses at around $87.00 while printing the first negative performance in four days.
• Gold pokes monthly high above $1,780 during a three-day uptrend.
• USD Index drops for the second consecutive day as bears approach the yearly bottom surrounding 105.30.
• Wall Street closed with notable gains and allows equities in the UK and Europe to remain firmer.
• BTCUSD prints mild losses near $17,000 whereas ETHUSD drops 1.0% as sellers flirt with $1,280.

China, soft landing chatters allowed traders to be optimistic

The third day of declining covid numbers from the record high allowed Chinese policymakers to fast-track the unlocking in less-severed citing and bolster the hopes of faster recovery of the world’s second-largest economy. The same propelled the market sentiment in the Asia-Pacific region especially when the Fed is up for slowing down on the rate hikes.

Gold price also benefited from the optimism led by the Fed and China but crude remains depressed amid expectations of no change announcements from the upcoming OPEC+ meeting.

On the contrary, the Bank of Japan hints at the monetary policy tightening in the next year and drowned the USDJPY prices.

AUDUSD and NZDUSD could cheer a slight improvement in China’s Caixin PMI even as the activity gauge signals contraction.

Elsewhere, fears of more hardships for the crypto traders before the pain eases, mainly due to FTX-led bankruptcies and layoffs by the major industry players seemed to have probed the BTCUSD and ETHUSD buyers even as the weekly move remains positive.

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

Fed’s favorite inflation gauge in the spotlight

Although Fed’s Powell and Covid headlines bolstered the market sentiment by drowning the US Dollar, today’s US Core PCE Price Index for October will be crucial as it is considered the US central bank’s favorite inflation number. Also likely to impact the markets will be the US ISM Manufacturing PMI for November and the last rounds of Fedspeak before the blackout period.

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