The US dollar index maintained its bullish momentum on Thursday after a sharp rise on Wednesday and hit its highest level in more than two years on Friday before entering a consolidation phase. The US economic calendar will release data on the personal consumption expenditure (PCE) price index for November, and the European Commission will release the preliminary reading of the consumer confidence index for December later in the day.
The Federal Reserve (Fed) turned hawkish in the Summary of Economic Projections, which pushed up US Treasury yields and boosted the dollar in the second half of the week. In addition, optimistic macroeconomic data released by the United States also further supported the dollar during the US trading session on Thursday. Earlier on Friday, investors took a cautious stance due to growing concerns about the US government shutdown before the holidays. At press time, US stock index futures are currently trading between 0.1% and 0.4% lower on the day.
The Bank of England (BoE) announced on Thursday that it would maintain the bank rate at 4.75% after the December meeting. However, three members of the Monetary Policy Committee (MPC) unexpectedly voted in favor of a rate cut, which led to selling pressure on the pound. GBP/USD extended its decline in the Asian session on Friday after falling more than 0.5% and hit its lowest level since May below 1.2480. The currency pair made a phased technical correction and traded around 1.2500 in early European trading on Friday. Meanwhile, data from the UK showed that retail sales in the UK rose 0.2% month-on-month in November, lower than analysts' expectations of a 0.5% increase.
The People's Bank of China (PBoC) announced on Friday that it would maintain the one-year and five-year loan prime rates (LPRs) unchanged at 3.10% and 3.60%, respectively.
After a year full of central bank policy decisions, the central banks of the United Kingdom, Japan, Norway and Australia kept their policies unchanged, Switzerland and Canada each cut 50 basis points at their last meetings at the end of the year, and the Swedish Central Bank and the European Central Bank also cut their policy rates by 25 basis points each.
USD/JPY gathered bullish momentum after the Bank of Japan (BoJ) did not commit to further tightening policy, rising more than 1.5% on Thursday. The pair hit a multi-month high near 158.00 in the Asian session but retreated to the 157.00 area in the European morning. Japanese Finance Minister Katsunobu Kato said on Friday that he was concerned about recent foreign exchange movements, including those driven by speculation. Kato also said that he would take appropriate action against excessive exchange rate movements.
The euro fell 1.4% this week and is now trading at $1.0360, facing key support at $1.0331.
Commodity markets were also hit by a stronger dollar. Oil prices fell on Friday, with U.S. WTI crude oil falling 0.6% to $68.98 and down 2.8% this week. Gold prices are also expected to fall 2% this week, with prices currently trading at $2,595.
Euro: EUR/USD price bearishly rebounded after testing the $1.0400 mark in the previous trading days, approaching the $1.0333 level again, and the price needs to break through this level to rebound to $1.0250, which represents our next negative target.
GBP: GBP/USD price fell sharply yesterday after positive attempts in the previous trading days, breaking through $1.2566 and reaching $1.2505, noting that the price broke through the last level, opening the way for continuing the intraday and short-term decline, and pointing to the next target of reaching $1.2400.
JPY: USD/JPY price soared yesterday, surpassing the awaited target of 156.74 and reaching the threshold of the 158.00 barrier to support the chances of continuing the bullish trend on an intraday and short-term basis, and moving towards visiting the 159.00 area as the next positive site.
