U.S Fed Chair opened the door for the central bank for a more aggressive monetary policy

• The policymaker said he sees six rate hikes this year and two for 2023
• Markets have been volatile over the past month as the situation in Ukraine has escalated
• Investors unloaded the Japanese Yen and sent it spearing below the psychological 120 level

Forex market

The dollar strengthened against a basket of major currencies yesterday, in the wake of comments from U.S. Federal Reserve Chair Jerome Powell that opened the door for the central bank to take a more aggressive monetary policy path. The greenback had been fluctuating between slight gains and losses earlier in the day and weakened slightly after comments from Atlanta Federal Reserve Bank President Raphael Bostic. 

The policymaker said he sees six rate hikes this year and two for 2023, a more dovish stance than most of his colleagues as he has concerns about the effects of the conflict between Russia and Ukraine on the U.S. economy. But the dollar gained ground after Powell said the central bank must move "expeditiously" to bring too-high inflation under control and will if needed, use bigger-than-usual interest rate hikes to do so. He keeps saying the same thing over and over, that we've got to get inflation down and whatever it takes that's what we're going to do.

Economic Calendar

The market unfortunately is hanging on to old norms, that they'll just do a quarter of a percentage point every time. The Fed is kind of rewriting that playbook - we may have to go every meeting, we may have to do something more than 25 basis points, and we might have to do rate hikes and quantitative tightening at the same time. 

Markets have been volatile over the past month as the situation in Ukraine has escalated, increasing the prices of commodities such as oil and putting upward pressure on already high inflation. The Fed raised its key interest rate by 25 basis points last week for the first time since 2018 as it attempts to combat rising prices while trying to avoid a policy error that could send the U.S. economy into recession. 

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Investors are now focused on the potential speed and size of future rate hikes. Ukraine defied a Russian demand that its forces lay down arms in the besieged port city of Mariupol before dawn yesterday. While many central banks around the globe have been hiking rates, with the Fed the latest to do so, the Bank of Japan on Friday maintained its massive stimulus program and held rates steady, while warning of increased risks from the Ukraine crisis to a delicate economic recovery. That disparity has served to weaken the yen, with the Japanese currency trading near six-year lows versus the dollar despite its safe-haven status.

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Euro-EUR

The single currency ended yesterday’s session lower. Russia's war in Ukraine will dent eurozone growth but the block is still set to expand, even if the conflict escalates, European Central Bank Vice President Luis de Guindos said today. He added that while high energy prices are pushing inflation to record highs. Overall, the EUR/USD traded with a low of 1.1001 and a high of 1.1117 before closing the day around 1.1049 in the New York session.

Yen-JPY

The Japanese Yen fell against the U.S Dollar as investors unloaded yen and sent it spearing below the psychological 120 level as the Bank of Japan looks increasingly isolated in its dovish policy stance. The yen hit a six-year low, having lost more than 4% on the dollar this month as leaping U.S yields and a deteriorating trade balance suck cash. Overall, the USD/JPY traded with a low of 118.45 and a high of 119.38 before closing the day around 119.13 in the U.S session.

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British Pound-GBP

The British Pound recovered against the dollar yesterday ahead of key domestic drivers for the currency, including inflation data, a panel discussion from Bank of England Governor Andrew Bailey and finance minister Rishi Sunak's Spring Statement. All are set to take place on Wednesday. Annual headline CPI is seen climbing to 5.9%, according to a Reuters poll. Overall, the GBP/USD traded with a low of 1.3108 and a high of 1.3195 before closing the day at 1.3177 in the New York session.

Canadian Dollar-CAD

The Canadian Dollar strengthened to its highest level in nearly two months against its U.S counterpart as oil prices climbed and speculators raised bullish bets on the currency. The price of oil, one of Canada's major exports, jumped as European Union nations considered joining the United States in a Russian oil embargo and after a weekend attack on Saudi oil facilities. Overall, USD/CAD traded with a low of 1.2586 and a high of 1.2644 before closing the day at 1.2597 in the New York session.

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Australian Dollar-AUD

The Australian Dollar took a step back today as an uber-hawkish outlook for US interest rates hammered bond markets and sent local yields lurching to three-year peaks. Australian bonds moved in lock-step with a huge increase in US yields as the Federal Reserve flagged the risk of one or more outsized rate hikes of 50 basis points. Overall, AUD/USD traded with a low of 0.7358 and a high of 0.7416 before closing the day at 0.7410 in the New York session.

Euro-Yen EUR/JPY

EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also issuing a bullish stance. The Relative Strength Index is above 61 and lies above the neutral zone. In general, the pair has gained 0.10%.

Sterling-Yen GBP/JPY

Currently, GBP/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 60 reading and lies above the neutral zone. On the whole, the pair has gained 0.72%.

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Aussie-Yen AUD/JPY

Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 76 reading and lies above the neutral region. In general, the pair has gained 0.97%.

Euro-Sterling EUR/GBP

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 53 and lies below the neutral region. Overall, the pair has lost 0.60%.

Sterling-Swiss GBP/CHF

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 45 and lies below the neutral region. In general, the pair has lost 0.28%.

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