Should we keep an eye on the strength and weakness of European currencies?

Should we keep an eye on the strength and weakness of European currencies?

20.05.2021

Yesterday, stock prices fell in both European and U.S. markets, creating a risk-off sentiment characterized by falling stock prices, lower oil prices, and a flat U.S. dollar. In addition to the stock market decline, the cryptocurrency market temporarily dropped by nearly 30% following Tesla’s suspension of Bitcoin payments, leading to a generally pessimistic mood.The minutes of the U.S. Federal Open Market Committee (FOMC) meeting released yesterday revealed that key members had discussed reducing the scale of bond purchases, which had a negative impact on stock prices.

In the foreign exchange market, the euro/yen—which had hit a new high for the year during yesterday’s European trading session—plummeted, falling from 133.43 to 132.63.Among the cross-yen pairs that plummeted yesterday, only USD/JPY has fully recovered, while other pairs such as EUR/JPY have failed to fully rebound and are trending toward a stronger yen. In particular, GBP/JPY has weakened further, falling to 153.9 during today’s Asian trading session. In contrast, EUR/GBP is currently attempting to rise around the 0.863 level.

Today’s schedule includes the German Producer Price Index at 15:00 CET, remarks by Bank of England Deputy Governor Canrif at 18:05 CET, the CBI Business Survey at 19:00 CET, and remarks by ECB President Lagarde at 20:50 CET, followed by U.S. Initial Jobless Claims and the Philadelphia Fed Business Outlook Index at 21:30 ET,at 11:00 PM, the U.S. Leading Economic Index; at 11:30 PM, U.S. weekly natural gas inventories; also at 11:30 PM, remarks by Kaplan, President of the Dallas Fed; and at 12:00 AM, remarks by Macklem, Governor of the Bank of Canada. We will be closely watching how European currencies, which have been weakening following today’s economic releases, will react.