Introduction to the US Federal Reserve’s Busy Week
The United States Federal Reserve had a busy week, with several key events and announcements that impacted the financial markets. On Monday, the Fed inquired about local New York banks’ positions in USD/JPY, sparking speculation about potential collaboration with Japan to address the Japanese Yen’s weakness. This news triggered a sharp US Dollar sell-off at the beginning of the week.
Federal Reserve Monetary Policy Meeting
Mid-week, the Fed held its monetary policy meeting, where it decided to maintain its target range for the federal funds rate at 3.50%-3.75%, as expected. During Chairman Jerome Powell’s press conference, he focused on the positive aspects of the economy, highlighting improvements in economic growth and a decrease in risks related to inflation and employment. However, he declined to address topics such as politics, his future, and the subpoena.
US Dollar Index and Upcoming Economic Data
The US Dollar Index is currently trading near the 96.90 price region, having recovered most of its weekly losses after US President Donald Trump nominated former Fed Governor Kevin Warsh as the next Fed Chair. The US Senate must now confirm the nomination. In the coming week, the US will release several key economic indicators, including the Institute for Supply Management’s Manufacturing Purchasing Managers Index, MBA mortgage applications, January Challenger Job Cuts, and Initial Jobless Claims.
Currency Market Updates
EUR/USD is trading near the 1.1880 price zone, having regained some ground after the USD recovered. Next week, the Hamburg Commercial Bank will publish the German and Eurozone Manufacturing, Services, and Composite PMIs. The Eurozone will also release the ECB Bank Lending Survey and the Eurozone December Producer Price Index. Germany will provide December Factory Orders and Industrial Production data.
GBP/USD is trading close to the 1.3600 level, ahead of the Bank of England’s monetary policy decision on Thursday. The UK calendar includes the final S&P Global January PMIs and the Halifax House Prices report.
USD/JPY is trading near the 154.50 price zone, having trimmed back some gains after Tokyo CPI figures showed inflation cooling in January. Headline inflation rose 1.5% YoY, while underlying measures eased to 2%, below forecasts.
USD/CAD is trading near the 1.3580 price zone, with the Canadian Dollar sitting over the USD despite Canadian data showing that the economy stalled in November. The Canadian calendar will offer the January S&P Global PMIs and Ivey PMIs.
Gold Prices
Gold is trading near the $1,880 price zone, having lost some weekly gains after reaching a record high of $1,958, as some traders took profits and the US Dollar rose sharply.
Anticipating Economic Perspectives
Several key economic events are scheduled for the upcoming week, including speeches from central bankers and the release of important economic indicators. On Monday, February 2, BoE’s Breeden and Fed’s Bostic will speak. On Thursday, February 5, BoE’s Governor Bailey, Fed’s Bostic, and Bank of Canada’s Governor Macklem will provide insights into their respective economies.
Central Banks’ Meetings and Upcoming Data Releases
The Reserve Bank of Australia will announce its monetary policy decision on Tuesday, February 3. The US will release the ISM Manufacturing PMI and December Jolts Job Openings on the same day. The Eurozone will publish the January Harmonized Index of Consumer Prices and the US will release the January ADP Employment Change on Wednesday, February 4.
Conclusion
The US Federal Reserve’s busy week has set the stage for an exciting period in the financial markets. With several key economic indicators and central bank meetings scheduled for the upcoming week, investors and traders will be closely watching the developments in the currency and commodity markets. As the economy continues to evolve, it is essential to stay informed about the latest trends and forecasts to make informed investment decisions.
