Forex Today: Fears and hopes mix ahead of Fed’s announcement

What you need to take care of on Wednesday, February 1:

Financial markets were quite volatile on Tuesday, as market players aimed to anticipate the upcoming US Federal Reserve decision. The United States central bank will be the first but not the last as the European Central Bank and the Bank of England will do the same on Thursday.

The US Dollar surged throughout the first half of the day helped by risk aversion. Asian stocks spent the day on the back foot, while European ones trimmed losses ahead of the close, led by gains in Wall Street. The mood improved after the release of US data signaling easing inflationary pressures.  The Employment Cost Index rose in the last quarter of 2022 by 1%, below the 1.1% expected and easing from 1.2% in the previous quarter. Afterwards, the US Dollar gave up its intraday gains, ending the day unevenly across the FX board.

The Canadian Dollar was the strongest USD rival, helped by firmer oil prices, while the British Pound was the weakest. USD/CAD settled at near the 1.3300 figure, while GBP/USD stands in the 1.2330/40 price zone.

The EUR/USD pair tested the 1.0800 price zone, to end the day at around 1.0860. The Euro Zone the Q4 Gross Domestic Product (GDP) showed the economy grew at an annualized pace of 1.9%, better than the 1.8% anticipated by financial markets. On a negative note, German Retail Sales plunged by 5.3% MoM in December, much worse than expected.

Australian data released at the beginning of the day was disappointing, with AUD/USD bottoming at 0.6983 during the European session. The pair later recovered to end the day unchanged in the 0.7050 price zone.

USD/JPY remain steady, now trading at around 130.15.

Gold met buyers around the $1,900 figure and finished the day at $1,929, while crude oil prices posted modest intraday advances and WTI currently changes hands at $78.50 a barrel.

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