Euro recovers tentatively from 26-month nadir
The euro rose in European trade on Tuesday against a basket of major rivals, extending its recovery from a 26-month low against the US dollar on short-covering.
The markets still expect the European Central Bank to cut interest rates at the January meeting, which would widen the rate gap with the US and hurt the euro further.
The Price
The EUR/USD pair rose over 0.3% today to $1.0277, with a session-low at $1.0238.
The pair closed up 0.1% on Monday, marking the first profit in five days away from a 26-month trough at $1.0177.
European Rates
Markets are estimating a 60% chance of a 0.25% ECB interest rate cut in January, as inflation continues to trend lower overall in the eurozone.
US Rates
The recent US payrolls report showed the economy added more jobs than expected in December, while unemployment fell unexpectedly in another sign of the tight US labor conditions.
The report tanked the odds of a Fed 0.25% rate cut in January from 7% to just 2.5%.
Now investors await important US inflation data this week to gather more clues.
A recent Reuters survey showed most economists expect the EUR/USD pair to reach parity in the first half of this year.
Yen moves in a negative zone before US inflation data
The Japanese yen fell in Asian trade on Tuesday away from a one-week high against the US dollar, moving in a negative zone for the first time in four days on profit-taking as investors await more data to confirm the path ahead for Japanese interest rates.
Investors also await crucial US inflation surveys later this week to gauge the likelihood of a Fed interest rate cut in the first half of the year.
The Price
The USD/JPY pair rose 0.4% today to 158.03 yen per dollar, with a session-low at 157.08.
The yen rose 0.15% yesterday against the greenback, marking the third profit in a row, with a week high at 156.91.
Japanese Rates
The latest reports indicated the BOJ is considering a hike to its core inflation forecasts in the 2024-2025 financial year, reflecting increasing worries about inflation.
Reuters’ sources said the BOJ will likely raise its inflation forecasts at the January policy meeting, which paves the way for a likely intervention.
The markets are estimating a 55% chance of a BOJ interest rate hike at the January meeting, while waiting for more data this week to gather more clues.
US Rates
According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in January stood at 3%.
The current US-Japan rate gap stands at 425 basis points in favor of the US, with any signs of a reduction in this gap underpinning the yen and vice versa.
Ethereum tumbles over 9% amid tepid risk appetite
Most cryptocurrencies slumped on Monday as the risk appetite weakened in the markets following US employment data.
US payrolls data released last week showcased the strength and flexibility of the labor sector, with the economy adding 265 thousand new jobs in December, easily beating estimates of 155 thousand.
US unemployment fell unexpectedly to 4.1% last month, below estimates of 4.2%.
The data will likely convince the Federal Reserve to stay away from rate cuts for an extended duration.
Later this week, the corporate earnings season will launch, starting with banks such as City Group, Goldman Sachs, JPMorgan.
Also later this week, US producer and consumer prices data will be released for December.
Ethereum
On trading, ethereum tumbled 9.1% on Coinmarketcap as of 18:25 GMT to $2992.6.
US dollar pares gains but still hovers at two-year highs
The US dollar rose against most major rivals on Monday and pared the gains, but still hovered near two-year highs after the US payrolls data.
US payrolls data released last week showcased the strength and flexibility of the labor sector, and will likely convince the Federal Reserve to stay away from rate cuts for an extended duration.
Later this week, the corporate earnings season will launch, starting with banks such as City Group, Goldman Sachs, JPMorgan.
Also later this week, US producer and consumer prices data will be released for December.
On trading, the dollar index rose 0.2% as of 18:07 GMT to 109.8, with a session-high at 110.1, and a low at 109.6.
Loonie
The Canadian dollar rose 0.1% against its US counterpart as of 18:18 GMT to 0.6937.
Aussie
The Australian dollar rose 0.1% against the US dollar to 0.6157.