Global FX Market Summary: Risk On, Fed Hawkishness, Eyes on Data (February 7th, 2024)

Dmitry Chernovolov Market Analyst

Risk Appetite Returns: Global markets swung towards riskier assets on Wednesday, February 7th, as evidenced by a rise in major equity indices and a corresponding decline in demand for safe-haven currencies like the USD.

Global FX Market Summary: Risk On, Fed Hawkishness, Eyes on Data (February 7th, 2024)

Risk Appetite Returns: Global markets swung towards riskier assets on Wednesday, February 7th, as evidenced by a rise in major equity indices and a corresponding decline in demand for safe-haven currencies like the USD. The S&P 500 closed up 1.2%, while the Euro Stoxx 50 gained 0.8%. This improved risk sentiment was likely fueled by positive corporate earnings reports and expectations of continued economic growth.

EUR/USD Gains Ground: The Euro (EUR) capitalized on the shift in risk sentiment, rising against the USD. The EUR/USD pair climbed above 1.0750, reaching its highest level since February 2nd. This move was further supported by technical factors, as the pair broke above its 20-day moving average.

USD Finds Support in Fed Rhetoric: Despite the overall risk-on environment, the USD managed to hold its ground against most major currencies. This resilience was primarily due to hawkish comments from Federal Reserve officials. St. Louis Fed President James Bullard reiterated his view that the Fed needs to raise interest rates further to combat inflation, while Minneapolis Fed President Neel Kashkari suggested two or three rate cuts throughout 2024 might be necessary. These remarks tempered market expectations for an early rate cut in March, leading to a slight increase in US Treasury yields and offering some support to the USD.

CAD Waits for Jobs Data: The Canadian Dollar (CAD) traded cautiously ahead of the release of key labor market data on Friday, February 9th. Economists predict a slight increase in the unemployment rate to 5.9% and the addition of 15,000 new jobs. This data will be closely watched by investors, as it could significantly impact the CAD’s future direction.

Upcoming Economic Calendar:

Date & Time (GMT)EventImportanceExpectedDescription
February 8, 13:30US Initial Jobless ClaimsHIGH220,000
Measures weekly new unemployment claims, impacting labor market strength.
February 9, 7:00Harmonized Index of Consumer Prices (YoY)HIGH3.1%
Key Eurozone inflation indicator, impacting ECB policy and EUR.
February 9, 13:30Canadian Unemployment RateHIGH5.90%
Measures Canadian labor market health, impacting CAD.
February 9, 13:30Canadian Net Change in EmploymentHIGH15,000
Shows new job creation in Canada, impacting CAD.

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