The euro and yen recorded its sharpest gains in four months, reaching $1.0560. This followed hawkish remarks from Isabel Schnabel, a European Central Bank (ECB) board member. She emphasized gradual rate cuts towards neutral territory, moving investors to adjust their rate cut expectations. The euro may face resistance near $1.06, especially as Germany's inflation data later today could bring volatility.
The Japanese yen rallied this week, marking its strongest performance in three months. It breached the 200-day moving average, hitting 151.50 per dollar. Rates pricing now suggests a 60% probability of a 25-basis point hike in Japan next month. This is up from 50% a week ago. Analysts attribute this to stronger-than-expected inflation readings in
Japan, alongside growing speculation of a December rate hike by the Federal Reserve. These developments have increased downside pressure on the dollar/yen pair.
The dollar's momentum slowed due to several factors, including reduced corporate demand after month-end requirements and thin trading ahead of the U.S. Thanksgiving holiday. The U.S. dollar index fell nearly 0.8%, settling at 106.13. Additionally, U.S. Treasury yields declined after data showed personal consumption expenditure meeting expectations with a 0.2% monthly increase.
The weaker greenback supported gains for other currencies like the Euro and Yen. The British pound rose to $1.2675, while the New Zealand dollar jumped over 1% after the Reserve Bank of New Zealand implemented a shallower-than-expected rate cut of 50 basis points. This contrasted with some market predictions of a 75-basis point reduction, boosting the kiwi dollar.
The forex market remains dynamic, driven by policy expectations and economic data releases. Traders should closely monitor these factors to adapt their strategies effectively.
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