Forex Today: Risk aversion lifts the Yen and the US Dollar

During Wednesday’s Asian session, the highlight will be Australian inflation data. Those numbers will be a key input before next week’s RBA meeting. New Zealand will inform trade data and credit card spending. Later in the day, the US Durable Goods Orders report is due. The US Dollar could continue to benefit amid a deterioration in market sentiment. 

Here is what you need to know on Wednesday, April 26:

The Japanese Yen rose sharply on Tuesday amid risk aversion on renewed banking concerns and a rally in government bonds. The US Dollar also rose. A week before the FOMC meeting, banking concerns are back, an episode that could become somewhat similar to what happened in March. 

First Republic Bank earnings calls triggered concerns about the banking sector's health. Bank’s executives delivered prepared remarks and refused to take questions. The bank lost $102 billion in customer deposits and borrowed $92 billion during the first quarter. The stock lost almost 50% on Tuesday. Bank stocks dropped sharply. 

Global equity markets fell and bonds rose, boosting the Yen and the Dollar. The Dow Jones tumbled 1.02% and the Nasdaq lost 1.98%. The US 10-year bond yield settled at 3.39%, the lowest since April 12. 

Economic data from the US came in mostly above expectations, with positive signs from the housing sector. The S&P/Case-Shiller Home Price index rose for the first time in eight months and New Home Sales surged 9.6% in March to a 683.000 annual pace, marking the third increase in the last four months.  CB Consumer Confidence dropped, but the present situation indicator improved. The critical report will be on Thursday with the first reading of Q1 GDP and consumer inflation. 

EUR/USD reversed from weekly highs above 1.1050 to 1.0960 as Eurozone yields tumbled on risk aversion. Inflation and GDP data are due on Friday. 

On Tuesday, Bank of England Huw Pill said that recent events moderated calls for higher interest rates. The UK informed an increase in borrowing of 20.709 billion pounds in March, slightly below expectations. It was the second-highest March borrowing since 1993, with the debt-to-GDP ratio reaching 100%, the highest since the 1960s. 

A rate hike at the next Bank of England meeting is priced in. GBP/USD dropped from 1.2500 to the 1.2400 zone amid Dollar strength. EUR/GBP surged to 0.8875, the highest in a month, then sharply reversed to 0.8840.

Ahead of Friday’s monetary policy decision, Bank of Japan (BoJ) Governor Kazuo Ueda suggested no imminent change. Speaking before parliament he said they should continue with monetary easing given current economic conditions. Despite Ueda’s comments, the Japanese Yen ended Tuesday sharply higher boosted by a decline in global government bond yields.

The Japanese Yen jumped on Wednesday. USD/JPY bottomed at 133.35, the lowest in ten days. CHF/JPY reached the highest level since 1980 at 151.51 and then reversed sharply, falling below 150.00

AUD/USD posted the lowest close in a month, below 0.6650. Australia will report inflation on Wednesday and the Reserve Bank of Australia (RBA) meets next week. 

NZD/USD approached 0.6200 and then reversed amid a stronger US Dollar, falling below 0.6150. Trade data from New Zealand is due on Wednesday. 

USD/CAD rose for the fifth consecutive day, climbing above 1.3600 for the first time since late March, boosted by the deterioration in market sentiment and lower crude oil prices.

Cryptocurrencies rose despite the decline in equity markets. Bitcoin climbed toward $28,000. Gold ended near $2,000 on a volatile session while Silver rebounded sharply from weekly lows to $25.00. 

The earnings season continues on Wednesday with Meta, Thermo Fisher Scientific, Boeing, GSK, Vale, Pionerr and Hilton.