Long-term rates in the US have been creeping down for the fourth session in a row amid warnings from major US investment banks that previous forecasts for the growth of the US economy for 2022 may be too optimistic. Goldman lowered its growth forecast for 1Q and for the full year for the third time in three months, following in the footsteps of JP Morgan, while the Atlanta Fed estimated its growth forecast for the first quarter at just 0.1%:

The softening of the uptrend in market rates took away support from the dollar as well: the US dollar index lost 1.3% in just two days. The sell-off in the dollar looks like profit-taking after the rally triggered by Powell's comments, and it's too early to talk about the end of the uptrend. There is still a lot of uncertainty around the March Fed rate hike, in particular, the size of the increase, in addition, the Central Bank has not yet announced details on asset sales, which, as already mentioned by the Fed, will occur along with the rate increases. In my opinion, the dollar will still remind of itself closer to the date of the March meeting, and the mark of 96 on the index will be the limit level of the current sell-off.

The RBA ended QE but signaled that it was in no rush to raise the rate, saying that "end of QE does not imply interest rate hike in the near-term". AUDUSD initially bounced lower due to the disappointment of AUD hawks on expectations that the RBA will move to active tightening, however, due to the broad weakening of the dollar, it subsequently turned into growth and is testing the level of 0.71 today. Along with the completion of the large-scale sell-off of the dollar, a reversal and a return to the downtrend and AUDUSD can be expected, as the RBA, in fact, laid the foundation today for further divergence of its policy with the Fed. A rebound in the pair may meet resistance at 0.7150:

As for the economic calendar for today, the main focus is on indicators of activity from the ISM in the US manufacturing sector, in particular on the price and hiring index. This will be one of the first reports that will allow to assess the dynamics of the US economy in the "tough" January.

Yesterday's report on inflation in Germany surprised, the annual price growth accelerated to 4.9% (forecast 4.3%). Together with the growth of long-term rates in the Eurozone, this may indicate expectations that the ECB will soon move into action and begin to catch up with the Fed. Still, chances that Lagarde will hint at a rate hike this year remain low.