FX Analysis – USD and GBP up on hot data, JPY and AUD under pressure

A hotter than expected CPI reading out of the UK along with a beat in US retail sales saw global markets turn risk off as rates markets hawkishly re-priced chances of cuts coming from Central Banks.

The unwinding of priced in Fed cuts saw a spike in treasury yields and the USD bid, with DXY hitting a high of 103.69 after the December US retail sales report came in hotter than expected. DXY finding resistance at the July-October  50% Fib level before paring gains.

GBP saw decent gains vs the USD and EUR after a beat in the December UK CPI reading where the Y/Y figure came in at 4% vs an expected 3.8%. GBPUSD fell just short of breaching the  1.2700 level, hitting a high of 1.2696 as UK rates markets priced in a lower amount of 2024 rate cuts.

JPY was weak throughout the session with losses accelerating after the US retail sales report. USDJPY taking out the big figure at 148 rising in lockstep the US-JP yield differential. On current momentum the psychological 150 level is possibly coming into play, and with it, BoJ intervention speculation.

AUDUSD extended January’s losses on the sour risk sentiment and mixed Chinese figures on Wednesday. The Aussie holding below 0.6600 and dropping to Decembers lows at 0.6520 before finding some support. AUD traders have todays key December employment report to look forward to, after a bumper November reading this one will be watched closely.