Following the highly volatile action witnessed on Wednesday and Thursday, markets seem to have turned cautious on the last trading day of the week. As investors await the January jobs report from the US, the US Dollar Index consolidates Thursday’s recovery gains slightly below and US stock index futures trade in negative territory. December Producer Price Index data will be featured in the European economic docket and S&P Global will release the final revisions to January Manufacturing and Services PMIs for Germany, the Eurozone, the UK and the US. Finally, the ISM will publish the US Services PMI ahead of the weekend.
The European Central Bank (ECB) decided to raise key rates by 50 basis points (bps) as expected and said that it intends to opt for one more 50 bps hike in March before reassessing the situation. During the press conference, ECB President Christine Lagarde refrained from committing to additional rate increases after March and noted that inflation risks are now more balanced. Lagarde’s dovish tone caused EUR/USD to lose its traction and the pair erased a large portion of Wednesday’s gains before stabilizing at around 1.0900 on Friday.
Meanwhile, the Bank of England (BoE) announced that it hiked the policy rate by 50 bps to 4% with 7 members of the MPC voting in favor of the decision. The BOE’s policy statement revealed that the bank lowered inflation forecasts and saw a shallow recession. Additionally, BoE Governor Andrew Bailey noted that they will re-evaluate the policy if the economy evolves in line with their central forecasts. The Pound Sterling came under strong selling pressure following the BOE event and GBP/USD dropped to its lowest level since mid-January at 1.2220. Early Friday, the pair continues to edge lower and trades below 1.2200, pressured by risk aversion.
Although US Treasury bond yields continued to stretch lower on Thursday, the renewed US Dollar strength forced XAU/USD to turn south. Gold price retraced its weekly advance and was last seen trading in a tight channel slightly above $1,910.
USD/JPY managed to stage a rebound from multi-week lows on Thursday but failed to gather recovery momentum. Early Friday, the pair is moving up and down slightly above 128.50. Bank of Japan (BoJ) Governor Haruhiko Kuroda told the Japanese parliament on Friday that the BoJ must maintain the ultra-easy policy to support the economy and create an environment for firms to hike wages.
Bitcoin touched its highest level since mid-August above $24,000 on Thursday but ended up posting modest daily losses. BTC/USD was last seen trading flat on the day at around $23,500. Ethereum reversed its direction after rising above $1,700 on Thursday and declined below $1,650 early Friday.