FX Analysis – DXY, USDJPY, USDCAD, AUDUSD

USD was offered in Tuesdays session, with the US Dollar Index (DXY) printing a low of 102.060 ahead of the last major economic release for the year in Fridays  Core PCE reading.  Hawkish leaning comments from the Feds Bostic that he only sees two Fed rate cuts in 2024, less than the Fed median of three and well under the market pricing of six, failing to lend much support to the greenback.

JPY was the obvious FX underperformer, seeing USDJPY hit a high of 144.95, just failing to breach the psychological 145.00 level before retracing somewhat. JPY took a hit on the BoJ meeting where the central bank stood pat and unanimously left its rates and YCC unchanged.  There was some pricing in on this pair of a hawkish surprise from the BoJ which didn’t materialise.

AUD and NZD were the G10 outperformers. AUDUSD benefitting from improved risk sentiment and the December RBA Minutes which suggested the Board considered whether to hike by 25bps or keep rates steady, NZDUSD caught a tailwind from upbeat NZ trade data.

CAD strengthened on the hotter-than-expected inflation data, where the year on year figure came in at 3.4% a beat of the expected 3.3%. CAD also receiving support from a rally in crude oil prices on the back of Red Sea tensions affecting oil transportation. USDCAD dropping to 5-month lows and seeing the daily RSI move into extreme oversold territory.