With the USD/JPY Rally, Investors are now turning their attention to the US dollar which appears to be shrugging off its previous soft tone.
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The US Dollar is Shrugging Off Previous Soft Tone
The US Dollar: Riding the Wave
Navigating the Volatile Markets
The US Dollar is Shrugging Off Previous Soft Tone
The USD/JPY pair has been pushing higher in Tuesday’s European session,
breaching recent highs at 133.15 and hitting fresh one-week highs near 133.40.
This comes after Bank of Japan Governor Haruhiko Kuroda dismissed
any chance of a near-term exit from the bank’s ultra-expansive monetary policy on Monday,
increasing negative pressure on the Japanese Yen and providing support
for the greenback against its major counterparts including JPY and EUR pairs.
It seems that investors are now looking ahead with optimism towards potential fiscal stimulus measures
by President Joe Biden’s administration as well as further progress
in vaccine rollouts across various countries around the world which could help
drive economic recovery later this year or early 2022.
This is likely why we are seeing some strength return into riskier assets
such as equities while also supporting haven currencies like the USD versus other major currencies like JPY or EURO.
Overall it looks like traders have started focusing more heavily
on fundamentals rather than speculations when it comes down
to trading decisions about currency movements; if this trend continues
then we may see further gains for the USD over the coming weeks
especially if there are no new developments concerning central banks’ policies
such as BoJ’s monetary stance going forward.
This positive turn of events can be attributed to the risk appetite triggered
by China’s decision to scrap quarantine requirements for inbound travellers.
The move shows that China is taking proactive steps towards reopening its economy
and restoring confidence in global markets, which could bode well for other countries too.
The news was welcomed with enthusiasm across financial markets,
driving up stock prices and pushing down bond yields,
both signs of improved investor sentiment.
The US Dollar: Riding the Wave
This optimism has also had an impact on currencies such as the US Dollar;
after initially declining at the start of this week due to increased risk aversion
caused by coronavirus fears, it appears that traders are now more willing to take risks again,
resulting in gains against some major currency pairs such as EUR/USD and GBP/USD over recent days.
As we move forward into what many believe will be a period of recovery from COVID-19 disruption,
investors may continue looking favourably upon safe-haven assets like gold or USD;
however only time will tell if these initial gains seen this week can be sustained through further uncertainty ahead!
The post-Christmas market in Japan has been a bit thin, with mixed economic data.
Employment numbers were slightly better than expected,
but retail consumption dropped to 2.6% in November below the consensus of 2.8%,
and down from 4.4% seen in October.
The Japanese economy is still feeling the effects of COVID-19,
as people are being more cautious about their spending habits after months of uncertainty
and job insecurity due to pandemic restrictions throughout 2020.
However, there may be some hope on the horizon for 2021,
employment figures suggest that businesses have started hiring again despite current conditions;
this could lead to an increase in consumer confidence
which would help boost retail sales going forward into next year.
In addition, investors and policymakers alike need to keep an eye
on how different sectors are performing within Japan’s economy over time,
while retail consumption might be dropping now, other industries
such as manufacturing or services could see growth if they become more competitive globally.
This kind of diversification will help ensure sustainable long-term success
even when one sector is struggling at any given moment.
Navigating the Volatile Markets
Overall, it looks like we can expect continued volatility across all markets
until things start improving significantly worldwide;
however, by keeping track of key indicators such as employment figures
or consumer sentiment we’ll have a better idea of
where things stand moving forward into 2021 so let’s stay tuned!
The markets are keeping an eye on three important economic indicators in the US calendar:
US Goods Trade Balance, Housing Prices, and Dallas Fed Manufacturing Index.
This trio of data points can provide insight into how well the economy is doing
and whether it is likely to grow or contract over time.
The US Goods Trade Balance measures exports versus imports for goods
shipped across international borders within a given month.
If exports exceed imports, then this indicates that domestic production has been strong enough
to meet demand from abroad – a sign of economic strength.
On the other hand, if imports outnumber exports,
then this could be indicative of weak domestic production
or increased foreign competition in certain industries,
both signs that could lead to slower growth down the line.
When people feel more confident about their financial situation,
they’re more likely to invest in homes which drives up prices accordingly (and vice versa).
The Dallas Fed Manufacturing Index provides another measure of confidence
since it tracks new orders placed with manufacturers based on surveys conducted each month,
so any increase here would indicate higher demand for products being made domestically
which should help drive GDP growth moving forward.
Finally, although these indicators may have a limited impact on currencies directly
due to their localized nature (as opposed to global events such as central bank decisions),
traders will still be paying close attention since any changes here may foreshadow shifts
elsewhere around the world later down the road!