FX market outlook

FX market outlook

USD loses strength; Aussie hits near 2-year high against euro after Australian jobs data.

The US dollar lost some strength against the yen today after making some strong gains on the back of hawkish comments from Fed Chair Janet Yellen on Tuesday and Wednesday. The main focus in the Asian session was the aussie, which saw some volatility after Australian jobs data.
The aussie initially spiked up after the data showed that the unemployment rate in Australia unexpectedly fell in January to 5.7 percent from a prior 5.8 percent. This led EURAUD to revisit a 20-month low of $1.3723. AUDUSD rose to a 3-month high of $0.7731 before falling after investors digested the details of the jobs report which showed a disappointing drop in full-time jobs that are needed to help boost wage growth and inflation.
The dollar eased lower against the yen to reach as low as 113.65 in late Asian session trading. On Wednesday, USDJPY hit a near 3-week high of 114.95 after the market saw an increased probability of a rate hike at the Fed’s policy meeting in March, following some strong US inflation and retail sales data that were released on Wednesday.

Also lifting the dollar were optimistic remarks by the central bank’s chief, Janet Yellen after two days of testimony before the Senate Banking Committee and the House Financial Services Committee.  The dollar index, which measures the greenback against six major counterparts, fell to 100.92 in Asia today after hitting a one-month high of 101.76 on Wednesday.
The softer dollar helped the euro regain the key $1.06 handle, pushing EURUSD to a high of $1.0636. The pound also moved higher against the dollar to come close to the key $1.2500 level.
In commodities, WTI oil prices retreated from Wednesday’s high of $53.48 a barrel after data showed an unexpected build in US crude inventories. Gold rose to its strongest level in a week at $1,236.66 an ounce due to a softer dollar today.

Looking ahead to the rest of the day, markets will look at a raft of US data which include initial jobless claims, building permits figures and the Philly Fed manufacturing index.