Yen plummets as BOJ buys more bonds from buzai232's blog

This week, continued Russian hostilities against Ukraine and increased sanctions on Russia increase risk-aversion sentiment, providing support for the safe-haven dollar, with the dollar index reaching the 101 level earlier in the week. To get more news about topfx referral, you can visit wikifx.com official website.

The dollar pulled back from its recent highs on Wednesday though, with the dollar index falling to 100.2 from over 101 earlier in the week. The dollar had been overbought in the past few weeks, boosted by hawkish Fed rhetoric and from the war in Ukraine. Wednesday’s retreat was a correction to more realistic figures. Yields also withdrew across the US treasury curve, with the US 10-year treasury note falling from 3% to approximately 2.8% on Wednesday.

Inflation remains one of the biggest problems for the US economy, with CPI data last week showing that headline inflation in the US rose to 8.5%, its highest rate since 1981. Producer Price data jumped by 11.2% from last year’s data, marking the biggest increase on record in over a decade. Soaring inflation rates in the US have increased expectations of a high rise in the Fed’s benchmark interest rate, buoying the dollar.

Over the past couple of weeks, Fed rhetoric has been one of the primary drivers of USD price, as the Fed signals a faster pace of policy tightening in the US. Markets are beginning to price in a steep rate hike of 50 base points at the Fed’s next policy meeting in May. Markets have been pricing in a total of over 225 base points of additional interest rate hikes this year, boosting the dollar.

This week, Fed rhetoric continued raising expectations of a steep rate hike, with FOMC member Evans commenting that he sees benchmark interest rates rising as high as 2.25%-2.5% by the end of the year. This implies that the US Central Bank would perform three more rate hikes of an average of 50 base points this year. Fed member James Bullard, who is a known advocate of a tighter monetary policy, in his speech on Monday, didn’t rule out even a 75 base point rate hike and stressed US inflation is ‘far too high’. He stated that he would even support a 3.5% interest rate rise by the end of the year, although he doesn’t expect that such a dramatic increase would be needed.

Minutes of the latest Fed meeting indicated that several Fed officials were in favor of a rate hike of 50 base points, increasing the chances of a 50 bp increase in the Fed’s benchmark interest rate in May. FOMC minutes also signaled that the US Central Bank would reduce its bond holdings by as much as $95 billion per month.

Several important financial, inflation and economic indicators are scheduled to be released on Thursday for the dollar, including Philly Fed Manufacturing Index and Unemployment Claims.

In addition, Fed Chair Powell is due to deliver a speech at the Volcker Alliance and Penn Institute for Urban Research Special Briefing on Thursday, which may cause volatility for the dollar.

The IMF is holding one of its bi-annual meetings this week, the IMF Spring 2022 meeting, where global economic conditions and policy shifts will be discussed at length. Fed Chair Jerome Powell is due to deliver a speech at the event on Thursday and investors will focus on his speech for hints into the Fed’s strategy in the coming months.
The Euro climbed on Wednesday, taking advantage of a weakening dollar, with the EUR/USD reaching 1.086. The Euro fell sharply last week, plummeting below the 1.080 level support, following the release of a dovish ECB statement. The outlook for the pair is bearish, and the EUR/USD is currently testing the 1.080 level support. If the currency pair goes up, it may encounter resistance at 1.118, while if it declines, support may be found at the 1.080 level and further down near 1.063.

German PPI data released on Wednesday, which is a key indicator of consumer inflation, showed that prices in the Eurozone’s leading economy continued to rise. Soaring inflation rates in the EU increase the chances of an eventual shift towards a more hawkish policy. On Wednesday, ECB member Martins Kazaks hinted at a possible rate hike at the ECB’s monetary policy meeting in July, boosting the Euro.