ECB continues to push back against market expectations.
Markets have continued to monitor ECB rhetoric closely. Council member Villeroy stated that the market reaction to the ECB may have been too strong which suggested further unease over the market moves seen since last week’s meeting.
Fellow council member de Cos stated that recent inflation data has shown surprising upwards trend, although there is still a high degree of uncertainty over the outlook and inflation is not likely to remain above 2% over the medium term.
The push back against market expectations limited the scope for further Euro buying.
The US Treasury market remained an important focus during Tuesday as benchmark yields probed the highest levels since December 2019.
The 10-year yield peaked around a key resistance level around 1.97% before correcting slightly to trade just below 1.95% on Wednesday with some support after a solid 3-year auction.
Global equities have posted net gains over the past 24 hours with Wall Street markets posted net gains and underpinning global sentiment.
Gains in the financial sector support the US market and there was fresh buying for major Nasdaq stocks including Amazon and Apple.
Hopes for an easing of Ukraine tensions also helped support global sentiment.
Canada reported a trade deficit of C$0.14bn for December which was the first deficit for 6 months and compared with market expectations of a C$2.5bn surplus. There was an unexpected decline in exports on the month despite high oil prices with a solid increase in imports. The data contributed to a slight net under-performance for the Canadian currency relative to other commodity currencies.
Trading ranges were again subdued on Tuesday with markets looking for fresh direction. The dollar consolidated ahead of Thursday’s US CPI data.
Firm yields pushed USD/JPY to 1-month highs at 115.65 before a slight correction.
The Euro was hampered by a further push back by ECB officials against the market interpretation of last week’s policy meeting. EUR/USD drifted around 1.1420, but held above 1.1400.
GBP/USD was able to hold firm on BoE tightening expectations with GBP/USD trading close to 1.3550. GBP/EUR higher to around 1.1880 as volatility subsided.
The Canadian dollar was unable to make headway with USD/CAD close to 1.2700 amid concerns that market rate expectations are too high.
EUR/CHF was unable to re-test the 1.0600 area and was held near 1.0565.
|German Trade Balance(DEC, 2021)
|USD MBA Mortgage Applications