The United States of America

USD is weakening against JPY, strengthening against EUR and has ambiguous dynamics against GBP.

Due to a lack of significant economic releases, the currency’s movement is due to external factors: investors are preparing for the first US Federal Reserve meeting of the year on Wednesday, where officials are likely to keep interest rates at 5.50% and limit themselves to several cautious statements. Investors will look for hints about the specific timing of the start of reducing the cost of borrowing. So, in December, experts assumed that it would begin in March. However, January statistics showed that the American economy remains strong, and the risks of a new acceleration of inflation amid worsening geopolitical tensions in the Middle East and the reorientation of maritime cargo flows remain. Traders are now less clear on their expectations, with most suggesting that the shift to the “dovish” rhetoric will begin in May or June, with interest rates changing by 140.0 basis points over the year.

Eurozone

EUR is weakening against GBP, JPY, and USD.

Yesterday, the head of the Dutch Central Bank and member of the European Central Bank (ECB), Klaas Knot, said that regulator officials needed to see evidence of a slowdown in wage growth in the region before moving to cut interest rates, and confirmed that inflation could return to the target level of 2.0% by 2025. After last week’s ECB meeting, most investors believe that monetary policy adjustment in the Eurozone will begin in April. However, experts believe that a borrowing costs reduction will not occur until June.

The United Kingdom

GBP is strengthening against EUR, weakening against JPY and has ambiguous dynamics against USD.

Investors wait for the Bank of England’s first meeting of the year on Thursday. Most likely, the regulator will keep the interest rate at 5.25%. The accompanying statement and comments from officials may contain hints on the timing of the start of monetary policy easing. Experts believe that the borrowing costs reduction will begin in May or June. According to the December survey of British citizens on inflation expectations, conducted by Citibank UK against YouGov Plc., the majority of respondents expect the rate to be 3.5% over the next twelve months instead of 3.9% as previously expected, and in the long term (5–10 years) – 3.4% compared to 3.5% previously.

Japan

JPY is strengthening against EUR, GBP, and USD.

Investors are keeping an eye on wage negotiations that began last week as their success is expected to determine how quickly inflation in the Japanese economy can stabilize at 2.0%, and the Bank of Japan begins a transition to the “hawkish” rhetoric. According to the Japan Confederation of Trade Unions, last year, the average wage increase was 3.58% but at present, an increase of even 3.0% would pose a significant financial burden for domestic companies as the global economic crisis continues and the country’s economy is not stable enough.

Australia

AUD is strengthening against EUR, GBP, JPY and USD.

On Tuesday, investors expect the publication of preliminary data on retail sales: according to forecasts, their volume will increase by 2.0% in December after falling by 0.2% earlier, reflecting the persistence of strong demand in the national economy, despite the long-term “hawkish” monetary policy The Reserve Bank of Australia (RBA), allowing officials to keep interest rates at current levels to combat inflation.

Oil

Oil prices are falling.

The negative dynamics seems to be a technical correction since the main fundamental factors continue to contribute to the rise in oil price. Investors are concerned about the likelihood of increased geopolitical tensions in the Middle East after the incident at a US military base on the border of Syria and Jordan. Meanwhile, Yemen Houthis continue to attack large commercial vessels in the Red Sea and cause a fire on the Marlin Luanda tanker over the weekend, forcing shipping companies to redirect cargo flows and increasing costs.