MHMarkets：2024.02.20 MHM European Time Analysis

Date: 2024.02.20 MHM European Time Analysis

The Canadian CPI is expected to increase by 3.2% YoY in January, with economists anticipating a monthly rebound to 0.4%. This data, set for release by Statistics Canada on Tuesday at 13:30 GMT, could influence the Bank of Canada's (BoC) decision on interest rate cuts, affecting the Canadian Dollar's value. The report might show a deceleration in annual inflation due to lower food and energy prices, although core inflation, excluding these volatile items, may stay elevated due to high borrowing costs. Analysts suggest a mixed inflation report could maintain the BoC's cautious stance on easing policy. Market expectations, shaped by Canada's OIS curve, foresee a possible rate cut by July. BoC Governor Tiff Macklem highlighted the slow journey back to 2% inflation, emphasizing persistent risks from high shelter prices.

The Australian Dollar (AUD) ended its four-day rise on Tuesday due to a strengthening US Dollar (USD), influenced by higher US Treasury yields. The AUD/USD pair faced additional pressure from a decline in the S&P/ASX 200 index, particularly from the mining and energy sectors amid falling commodity prices. Despite the People's Bank of China (PBoC) keeping its one-year Loan Prime Rate (LPR) unchanged and cutting the five-year LPR by 25 basis points, the AUD did not significantly react to the Reserve Bank of Australia's (RBA) latest meeting minutes. These minutes revealed discussions on interest rate strategies, suggesting a cautious approach to further hikes. Meanwhile, the US Dollar saw a rise with market anticipation for the upcoming Federal Open Market Committee (FOMC) Minutes. Market predictions by ANZ and the CME FedWatch Tool suggest potential US rate cuts starting from mid-2024, with a focus on the June meeting's outcomes.

Atsushi Mimura, a Japanese Finance Ministry official, stated on Tuesday that the government is constantly in communication and coordination with other nations regarding potential foreign exchange (FX) intervention. He emphasized the importance of safety and liquidity in managing FX reserves, noting that the government could sell assets, including savings and foreign bonds, as part of intervention efforts.

Despite these comments, there was no immediate support for the Japanese Yen in the markets. As a result, the USD/JPY pair was observed to increase by 0.18% to 150.37, indicating a stronger US Dollar against the Yen following Mimura's remarks.