On Thursday, January 6, this is everything you need to know:
The Dollar lost ground versus its main competitors throughout the first half of Wednesday’s session but reversed course in the latter part of the American session as US Treasury bond rates surged.
The US Dollar Index continues to move upward in the early European session on Thursday, as speculators digest the minutes from the December FOMC meeting.
Germany’s Destatis will issue December’s initial inflation figures. Later in the day, the US economic calendar will feature the weekly Initial Unemployment Rate Claims, the November Goods Trade Balance, and the December ISM Services PMI.
The Federal Reserve Balance Sheet
The FOMC’s December decision meeting notes indicated on Wednesday that members expect financial statement normalization to begin sooner than it did last time following the first-rate rise.
Some delegates also said that it could be prudent to begin shrinking the Federal Reserve’s balance sheet very soon after initiating rate hikes, the journal stated.
The 10-year US Treasury note yield initially rose to its highest level since March before extending to near 1.75% early Thursday.
Traders are pricing a 68% likelihood of a 25 basis point rate rise in March, according to the CME Group FedWatch Tool.
The hawkish monetary outlook had a significant impact on US stock markets on Wednesday, with the S&P 500 falling nearly 2%.
Additionally, the S&P derivatives were down 0.5% at press time, implying that the stock market selloff may persist after the opening bell.
Major Currency Pairs
On Wednesday, the EUR/USD lost a significant amount of its daily advances in the second period of the day and was seen challenging 1.1300. Eurostat will issue its Nov Producer Price Index data, but speculators’ attention is expected to remain on US Treasury bond rates.
Late Wednesday, GBP/USD hit a record high in over two months late Wednesday at 1.3600 but then reversed course. As of this posting, the exchange was moving beneath 1.3550 in the negative area.
The USD/JPY took advantage of higher yields on Wednesday, closing over 116.00. The risk-averse economic climate is assisting the JPY in retaining some strength versus the Dollar, as the pair was trading at 116.00 early Thursday.
Prior to the FOMC proceedings, Gold advanced near $1,830, but closed the day in the red at $1,809, weighed down by soaring US Treasury rates. XAU/USD is under pressure and is edging down toward $1,800.
The bearish impact on Bitcoin has increased in the aftermath of the FOMC’s announcement, with BTC trading at its lowest level in a month at $43,000. Ethereum continues to tumble, having lost more than 6% on Wednesday, and is currently trading below $3,500 for the first time since mid-October.