Dollar Consolidates, Geopolitics the Next Fokus
The US dollar strengthened in the second half of trading on Wednesday (December 19, 2020), then moved sideways on Thursday morning after the market digested the hawkish tone of the Fed's meeting minutes. The next focus will be on the release of the US Goods Trade Balance and Initial Jobless Claims, while market participants remain wary of geopolitical developments.
The Fed minutes emphasized that the central bank is not acting with a "one-way bias." Several officials reportedly want a more two-pronged policy language, including leaving open the possibility of an interest rate hike if inflation remains above target. As a result, the USD Index rose more than 0.5% on Wednesday, touching 97.80, before stabilizing around 97.70.
Geopolitical attention also intensified after US media reports suggested the US military was prepared for possible action against Iran as soon as the weekend. These tensions have boosted safe-haven assets: gold remains strong above $5,000, while the FX market tends to be more cautious.
From Australia, labor data showed unemployment remained at 4.1% in January (better than the 4.2% expected). Although the +17.8K job increase was slightly below estimates, AUD/USD remained strong and held above 0.7050 as the market assessed relatively solid labor conditions.
In New Zealand, comments from the new RBNZ governor confirming that policy would be adjusted if the inflation outlook changed helped NZD/USD rebound after falling more than 1% the previous day. The pair climbed back to around 0.5980.
Meanwhile, among major pairs, EUR/USD was under pressure from the strengthening dollar on Wednesday, then attempted to recover to the 1.1800 area. GBP/USD also touched a four-week low around 1.3480 before returning to the 1.3500 area, while USD/JPY continued its rise and held around 155.00.
Source: Newsmaker.id
