Forex Today: Policy divergence and geopolitics drive the sentiment

Forex Market Summary

Headline: Policy Divergence and Geopolitics Drive Market Sentiment

Date: April 22, 2024

Author: Pablo Piovano

Key Points:

• The US dollar rose slightly, keeping the USD Index afloat in the low 106.00s.
• The euro (EUR/USD) and British pound (GBP/USD) retreated due to risk-on sentiment.
• The Japanese yen (USD/JPY) reached a 34-year high amidst market consolidation.
• The Australian dollar (AUD/USD) rebounded, while WTI oil prices remained stable.
• Gold and silver prices fell due to declining geopolitical concerns.

US Dollar and Economic Indicators

The US dollar (USD) showed modest gains at the beginning of the week, as risk appetite boosted the currency. Upcoming economic indicators for the US include:

• Flash Purchasing Managers' Index (PMI)
• New Home Sales

Euro and European Economic Indicators

The euro (EUR) declined against the USD despite the upbeat risk-on mood. European economic indicators to watch on April 23 include:

• Preliminary PMIs in Germany and the Eurozone

British Pound and UK Economic Indicators

The British pound (GBP) extended its decline on April 22. Economic data for the UK to be released on April 23 include:

• Advanced PMIs
• Public Sector Net Borrowing

Japanese Yen and Economic Indicators

The Japanese yen (JPY) strengthened to a new 34-year high against the USD. No economic data is scheduled for release in Japan on April 23.

Australian Dollar and Economic Indicators

The Australian dollar (AUD) recovered on Monday, rising to two-day highs. Australia will release the Judo Bank Flash PMIs on April 23.

Oil and Precious Metals

• West Texas Intermediate (WTI) oil prices remained relatively unchanged after hitting new lows.
• Gold prices fell to multi-session lows as geopolitical concerns eased.
• Silver prices plunged more than 5%, revisiting the $27.00 mark per ounce.

Table: Currency and Commodity Prices

Geopolitical and Market Outlook

Diminishing geopolitical jitters have boosted risk appetite in the currency markets. Policy divergence between major central banks is also driving market sentiment. Aggressive interest rate hikes in the US and Europe are supporting the USD, while a more cautious approach by the Bank of Japan is keeping the JPY weak.

Conclusion

The forex market is expected to remain volatile in the coming week as traders weigh geopolitical developments and anticipate key economic data releases. Geopolitical risks, such as the ongoing conflict in Ukraine, will continue to influence market sentiment. Policy announcements and economic indicators from major central banks will also shape currency movements.