US Open Note – Market in a volatile day; dollar surges to more than 1 ½ -year high



PCE price index ticks up; Rates in US rise

December’s PCE data came into focus today from investors. The core PCE price index rose from 4.8% to 4.9% year-on-year. Currently, it is the highest since September 1983 and well above the Fed's 2% goal rate. Personal income and spending also came in at 0.3% and -0.6% m/m respectively. Because of the widespread distribution of the omicron variety, retail sales and consumption decreased in December of last year.

Rates in the United States are rising, which is supporting the dollar. For the first time since January 19, the two-year yield is trading at 1.22%, while the 10-year yield is trading at 1.84% and is nearing the 1.90% cycle high. A fifth rate increase this year is already priced in. In spite of this, the terminal Fed Funds rate is projected to fall short of 2% when the market should probably be looking at 2.5% or more.

ECB rate decision next week

The European Central Bank (ECB) is scheduled to meet on Thursday, and the expectation is a dovish hold on interest rates. After confirming that PEPP is over in March, the bank is expected to forcefully resist market expectations of tightening. At a time when the Eurozone economy has numerous challenges and is obviously faltering, stricter monetary policies are the last thing that the region needs right now. Next Wednesday the release of January's CPI numbers are on cards, which are projected to show a headline rate of 4.3% y/y compared to December's 5.0% and a core rate of 1.9% y/y compared to December's 2.6%.

FX news

In the currency markets, the US dollar index is continuing the upside rally, recording a fresh 19-month high of 97.40 supported by the rally in the two-year Treasury yield after the Fed’s relatively hawkish policy meeting. Dollar/yen is maintaining its upswing, jumping to 115.60, while euro/dollar is plunging to a 20-month low of 1.1120. US index futures suggest another negative session. However, pound/dollar’s volatility is weak, holding around 1.3400 at the moment.

In commodity currencies, dollar/loonie is advancing from the third consecutive day, while the aussie and the kiwi are tumbling to 18- and 17-month lows respectively, versus the dollar.

Elsewhere, oil prices are flattening around the previous highs, while gold prices plummeted below $1,800/per ounce again with strong momentum, with the next target coming near $1,760/per ounce.

Latest News


Technical Analysis – US 500 index’s downside bearing curbed as buyers step in


US Open Note – Dollar retreats and US futures take a breather as risk tone improves


Technical Analysis – EURUSD creates headways in broader bearish outlook


RBNZ is expected to raise rates; kiwi dollar surges – Forex News Preview

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.