Global market watch - 20th March 2019
The Greenback is trading mixed in tight ranges this this morning ahead of the key FOMC monetary policy meeting this afternoon. Market participants expect no change to the key Fed Funds Rate but will be closely watching the FOMC Policy Statement followed by the post meeting press conference for clues into future policy moves coupled with the Fed’s perception of the broader economy. There was a moderate reduction in risk tolerance overnight due to uncertainty over US trade policy with China because no concrete deal has been achieved. The Buck is trading a touch softer in its pairing with the Euro this morning, rose to its two-day best versus the Canadian Dollar as WTI Crude Oil prices fell to a two-day low after hitting a fresh 4-month peak yesterday, hit a two-day high against the British Pound as a result of the announcement that Prime Minister Theresa May will seek a shorter than expected Brexit delay, is sideways on balance with the Yen after USDJPY arose to a five-day peak overnight before risk appetite waned, is trading very at a fresh two-week low versus the Swiss Franc amid increased risk aversion, rose to a five-day high versus the Aussie Dollar and Kiwi this morning on the same risk-off factors that supported Yen and Swissy this morning, remained close to the 1.5-month low it hit versus the Mexican Peso yesterday as some traders have been favoring emerging market currencies this week, while it fell to a fresh 15-day low in its pairing with the Chinese Yuan this morning. Domestic Crude Oil Inventories later this morning precedes the key Fed meeting in the afternoon.
The Loonie is trading at a two-day low versus the Buck, erasing its rally to an 18-day low on USDCAD yesterday morning, following the Annual Budget release yesterday afternoon which unveiled a massive new CAD 22.8B spending plan which is unsurprisingly going to increase the Canadian deficit the coupled with WTI Crude Oil prices falling to a two-day low as well. EURCAD is trading at a fresh two-week peak this morning while CADJPY dropped steeply from a 15-day high yesterday. There is no Canadian data this morning with traders looking for guidance from Crude Oil Inventories this morning followed by the Fed meeting this afternoon.
The Euro is trading a touch firmer against the Greenback this morning, at a fresh two-week high versus the Loonie today, and firmed to its one-week best with the Pound on the news that UK PM Theresa May would seek a shorter than expected Brexit extension. German PPI MoM was released at -0.1% compared to +0.2% forecast consensus but the market was focused elsewhere with the Fed meeting this afternoon in the US and continued Brexit uncertainty in the UK at this time.
The British Pound fell to a two-day low versus both the Dollar, its one-week low against the Euro, while also trading a bit lower in its pairing with the otherwise soft Loonie as Brexit uncertainty trumped better than expected headline UK CPI YoY this morning. Prime Minister Theresa May is asking for a shorter than expected Brexit extension from the European Union in a perceived attempt to push her negotiated deal. While the extension of Article 50 is a positive for Sterling the market is wary of this shorter than anticipated extension. Meanwhile, the EU still has to grant said extension which could require either a new referendum or general election. The timeline is extremely tight as the UK is scheduled to leave the EU in only nine days, but it seems unlikely the EU will not grant some kind of extension as Germany has expressed concern of an “accidental no deal” Brexit result simply because nothing gets done and no extension is granted triggering Article 50 on 29 March as is. Political uncertainty has overshadowed data as UK CPI YoY today was +0.1% above forecast at +1.9% actual this morning in the wake of an excellent Average Hourly Earnings 3m/Y number at +3.4% coupled with a fresh low of 3.9% for the Unemployment Rate yesterday. UK Core CPI YoY was 0.1% worse than forecast at +1.8% while HPI YoY also missed target as the other data points were all on target for today. The Bank of England (BoE) monetary policy meeting is scheduled for tomorrow following the Retail Sales MoM data. Market participants are not expecting any policy tightening from the BoE amid Brexit uncertainty, but will be clued into guidance from the BoE on Brexit and the economy tomorrow.
The Buck improved to its five day best versus both the Aussie Dollar and Kiwi this morning ahead of the Fed policy meeting this afternoon due to event risk coupled with broad uncertainty around US-China trade, Brexit, along with softer Oil and gold prices today. Monday evening’s dovish Reserve Bank of Australia (RBA) policy minutes also continued to weigh on the antipodeans. New Zealand Current Account was better than anticipated at -3.26B compared to the -3.55B while the Australian MI Leading Index was released at 0.0% with the previous number revised up to 0.1% form 0.0% as well.
The Yen is sideways on balance versus the Buck this morning after USDJPY rose to a fresh 5-day peak overnight before risk aversion set in. The Yen was also sold off in early Japanese trading as a result of the dovish Bank of Japan (BJ) Monetary Policy meeting Minutes as some dissenting policymakers were urging more stimulus and faster as the economy seems to be slowing. The Yen fell to a 15-day low versus the Euro but did rebound from a sharp 15-day low against the Loonie from yesterday as CAD sold off this morning.
The Swiss Franc is trading at a fresh two-week best against the Dollar amid risk-off trading, the relatively firm Euro at the moment, along with the better than expected Swiss Trade Balance figure ahead of the key Swiss National Bank (SNB) meeting on tap for tomorrow.