The Greenback returned some of its recent wins when Fed Chairperson Janet Yellen reiterated her cautious view during her testimony in New York. According to the central bank head, only gradual increases in the benchmark rate are to be expected in the coming years especially since their inflation outlook has dimmed. She also noted that the global economic and financial slowdown pose risks but that employment and domestic spending remain strong.
USDJPY retreated from the 114.80 area to test support at 112.50, EURUSD bounced off 1.1200 to the 1.1300 handle, GBPUSD found support at 1.4250 and is up to 1.4380, and USDCHF is consolidating around .9665.
Yen recovers despite mixed reports
The latest economic figures from Japan have been mixed, with the economy indicating strong household spending and weak retail sales. Earlier today, the preliminary industrial production report printed a sharper than expected 6.2% slide versus the estimated 5.5% decline.
EURJPY is testing support at the 127.00 handle, GBPJPY fell from 162.24 to a low of 161.72, AUDJPY is 25 pips below the 86.00 mark, and NZDJPY dipped back to the 77.00 mark. No other major reports are lined up from the Japanese economy for the rest of the week, keeping market sentiment in play.
Commodity currencies advance slightly
Even with the usual degree of uncertainty in the financial markets, commodity currencies appear to be taking advantage of expectations of low borrowing costs from the Fed. After all, this could support business and consumer lending, which could then boost investor activity and equity market gains.
The US crude oil inventories report is up for release today and a smaller buildup of 3.1 million barrels compared to the earlier 9.4 million increase is expected. Reports that more countries are inclined to participate in the meetings on a possible oil production freeze are also helping support crude oil price, which is then keeping the Loonie afloat despite downbeat leading inflation indicators from Canada.
Up ahead, the ADP non-farm employment change report could provide some volatility ahead of the actual NFP release on Friday, with analysts expecting to see a 195K pickup in hiring for the ADP report. The NFP could show a 206K increase for March, slower than the earlier 242K rise.
Other factors that could influence market sentiment are the Chinese manufacturing and non-manufacturing PMIs due before the end of the week, as strong data could allow higher-yielding comdolls to regain ground against their lower-yielding safe-haven counterparts.
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