Market dynamics is mixed recently because on the one hand, some players believe that the Fed will continue to aggressively increase rates, while on the other hand, some consider that after raising it by 0.25% in February, the central bank will take a pause to observe further developments. There is also an opinion that the Fed will be forced to begin reducing rates in July.
While the discussion is going on, Fed Chairman Jerome Powell himself spoke at a symposium in Sweden on Tuesday. However, he did not comment on the prospects of the monetary policy, obviously not wishing to shake the markets before the release of the US inflation data on Thursday. This indicates that the bank has no sustained desire to raise rates, most likely hoping that inflation will fall quickly and that the US economy will not be hit so hard. Perhaps, Powell also wants a soft landing of the economy in the face of declining, albeit gradual, inflation. This is why there was a slight recovery in demand yesterday after a very volatile trading session on Monday.
For today, volatility will either surge or take a pause in anticipation of tomorrow's US CPI data for December. The latter has a higher chance of occurring because it is more logical under the conditions of uncertainty and the usual behavior of markets when there are important statistics.
Forecasts for today:
USD/JPY
The pair is likely to stay between 131.25-134.50 ahead of the US CPI data, which will be released tomorrow. If the figures show a decline, the pair will fall down to 129.45.
AUD/USD
The pair may stay within 0.6850-0.6950. If the US CPI figures show a decline, risk appetite will surge, which will lead to a rise to 0.7040.
