February 14, 2022
EUR/USD: The US Bureau of Economic Analysis reported on Thursday that annual inflation, as measured by the Consumer Price Index (CPI), jumped to its highest level in four decades at 7.5% in January. This print surpassed the market expectation of 7.2% and provided a boost to US Treasury bond yields while allowing the greenback to outperform its rivals. Additionally, St Louis Fed President James Bullard voiced his concerns over hot inflation and said he would support a 50 basis points (bps) rate hike in March. US stock index futures are down, suggesting that the dollar could preserve its strength in case markets remain risk-averse ahead of the weekend.
USD/JPY: USD/JPY pair remains around 115.40 during the initial hour of Tokyo open on Monday. The yen pair dropped the most since mid-January on Friday as yields plunged on easing Fed-rate-hike concerns and rising fears over the Russian invasion of Ukraine. That said, the latest moves could be linked to the market’s inaction and a light calendar ahead of the key releases. On Friday, US President Joe Biden raised concerns about an imminent military attack by Russia over Ukraine. Not only US President Biden but the UK and Eurozone leaders also flashed worrisome signals for the much-debated geopolitical event. Looking forward, headlines concerning Russia and inflation may entertain USD/JPY traders with a light calendar on Monday. However, Tuesday’s Preliminary Q4 GDP and Wednesday’s FOMC Minutes will be important for the pair traders to watch for clear direction.
XAU/USD: The yellow metal remains near a 3-month peak as investors seek safety amid warnings from the US that Russia could invade Ukraine at any moment. Moscow denies any plans to invade and accuses the West of “hysteria,” despite the fact that more than 100,000 troops are stationed near Ukraine. However, “without a steady stream of buyers, gold prices are likely to succumb to a significant increase in real rates amid a hawkish regime at the Fed,” TD Securities analysts said. Gold traders may wait for more clues on the Russia-Ukraine story and the Fed’s rate-hike concerns for near-term direction. As a result, this week’s FOMC Minutes will be a crucial event to watch while also keeping eyes on geopolitics for fresh impulse.