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On January 8th, European Central Bank Vice President Guindos stated that interest rates are currently at an appropriate level, but warned of "significant uncertainty" brought about by geopolitical events. The policymaker said, "Some of whats happening now was unimaginable just a few quarters ago." Guindos stated, "Business investment could be affected in a complex geopolitical environment, but its currently evolving in a very mild manner." He added, "Despite some improvement in real income, households are keeping savings rates high due to concerns about the future and even fiscal policy." However, he indicated that the "complex geopolitical environment," including concerns about the conflict in Ukraine, has not yet had a substantial impact on the eurozone economy. "Current interest rates are appropriate; the latest data are entirely in line with our forecasts," Guindos said, "overall inflation is at 2%," and "the services inflation we were previously concerned about is slowing."Russia claims that the military declarations of the pro-Ukrainian "Volunteer Union" are becoming increasingly dangerous.A spokesperson for the Russian Foreign Ministry stated that Western troops and military facilities stationed in Ukraine will be considered legitimate operational targets.A spokesperson for the Russian Foreign Ministry stated that the deployment of Western troops and military facilities in Ukraine would be considered an act of intervention that threatens security.January 8th - British businesses expect a slight slowdown in wage growth and a slower pace of price increases over the next 12 months, a welcome sign for Bank of England officials who have been wary of overly high expectations. In the average survey for the fourth quarter, respondents expected wage growth of 3.7%, down 0.1 percentage points from the three months to November. Meanwhile, businesses expected their own price increases of 3.6%, also down 0.1 percentage points from the previous period. Bank of England policymakers had previously worried that wage and price expectations would remain high after inflation surged again to nearly double the 2% target last year. However, price pressures have eased faster than the Bank expected in recent months, and measures in the budget are expected to bring inflation down to near 2% by spring. A Bank of England survey of chief financial officers showed that businesses cut 0.4% of their workforce last year. The number of employees rose 0.5% year-on-year in December, recovering from a 1.8% drop in November. However, businesses still expect job cuts over the next 12 months, forecasting a further decline of 0.4% – the worst reading since 2020.

USD/JPY reaches 133.00 for the first time in three days, as US Treasury yields provide support

Daniel Rogers

Dec 26, 2022 19:18

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The USD/JPY exchange rate exceeded 132.80 and climbed to 133.15, the highest level since Tuesday. Following the release of numerous economic reports from the United States, US Treasury yields climbed, which weakened the Japanese Yen.

 

The most significant piece of news from the United States was the Core Personal Consumption Expenditure Price Index, which rose 0.2% in November, as predicted, and 4.7% from a year ago, a decline from October's 5%. The Federal Reserve monitors inflation indicators on a regular basis.

 

The decline in durable goods orders was 2.6% worse than predicted. The Michigan Consumer Sentiment Index increased to 59.7 in December, above the original estimate of 59.1. The 5.8% increase in November New Home Sales to 640K exceeded market expectations of 600K.

 

Following the release of all economic data, Wall Street stock prices are plummeting, just as they did on Thursday, when positive economic data caused a selloff. The difference on Friday is that bond yields are reacting with greater vigor, resulting in an increase in the USD/JPY exchange rate.

 

The pair is trading below 133.00 with a bullish intraday bias. The next potential level of resistance above the daily high could be around 133.50. The biggest downside support is the 132.50/60 band, which is the confluence of a horizontal level and a weekly low-drawn uptrend line. A decline in price would change the intraday bias from bullish to neutral or bearish.


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