24 hours of reconciliation

24 hours of reconciliation
It took all of 24 hours for the results of the rationality test to kick in after traders took time to the read the minutes from Wednesday. Not a heck of a lot has changed in the Feds view. The minutes were far more balanced than the equity market sell-off suggested. The discussions about their inflation target being symmetric indicate that the Feds are less concerned about the updraft from inflationary pressures than current market pricing. Overall there were few if any significant hawkish shift and traders have started to nimbly re-engage the US dollar downside not waiting until Powell’s key Humphrey Hawkins testimony which should clear up more than a few policy concerns.

The Feds will raise interest rates in March on the back of two strong inflation prints post-January meeting, but the market remains comfortably parked in the three rate hike camp for 2018.
This new Fed Chair will be as data dependent as his predecessor so, in reality, no one knows for sure what the Feds will do other than hike somewhere between two and four times in 2018.

Bond Markets

The bond markets continue to trade from a bear market bias, and this is unlikely to change anytime soon given the burdening supply issues which are compounded as the Feds delicately and gingerly pull back on QE largess.

Stock Markets
US equity market rebounded as concerns over rising US interest rates abate. If you were confused by Wednesday 50 pips downside adventure on the S&P post-FOMC minutes, you were not alone. However, until the dust is settled on the Fed policy debate, we should expect more back and forth ahead of Jerome Powells Humphrey Hawkins testimony.
Oil markets

Oil market bid was boosted by DoE inventories which saw a draw of -1.616 million barrels which far better than consensus and more profound than the -.9mn print by the API. While the market continues to communicate concern over rising levels of shale production, this bullish inventory data coupled with a slightly softer USD profile, it’s easy to see why oil prices are finding fresh session highs going into the NY close.
Gold Markets

Gold continues to act as less of a haven hedge and more as a proxy for USD sentiment. Given the greenback is trading within a restricted range as the stage is getting prepared for new Chair Jerome Powell, gold will remain supported by the $ 1324-25 levels given the markets ubiquitous bias to sell the USD.  But the topside should also stay in check as most traders will opt to only aggressively re-engage in  USD downside after Powell clears the policy airwaves in his Humphrey Hawkins testimony.

The Japanese Yen

No need to jump the gun, today’s CPI data will be a crucial driver in JPY sentiment. Post data comments to follow.

The Euro
Fact of fiction, the Euro remains a point of contention, but topside conviction remains low ahead of the Italian election compounded by softer EU economic data.

The Malaysian Ringgit 

The USDMYR landscape is a bit muddled, and this air of uncertainty could extend, more so if opinion on the soft dollar narrative become less reliable. Rising US interest rates and the markets growing sensitivity to local economic data presents some near-term challenges for the Ringgit. Ultimately we believe that US rates are in the process of topping but until we get a definitive signal from the New Fed chair, hopefully, next week, we should expect offshore flows to remain light in the short run.

None the less the Ringgit is getting support from higher oil prices and given we are far removed from the USDJMYR 4.0 danger zone, longer-term investors should continue to look for opportunistic levels to re-engage long MYR posting

The Chinese Yaun

Markets in China return from a week-long holiday only to discover the US has initiated another anti-dumping probe.. This time for rubber bands. Certainly sounds more bark than the bit, but non the less trade war discussion is picking up.

Continue to favour a constructive view on the Yuan given the markets negative USD bias. But he RMB complex will most certainly benefit from expected bond inflows which should accelerate as we move through 2018.

Gold Gains Ground, Puts Brakes on Dollar Rally

Gold has posted gains in the Thursday session, erasing the losses seen on Wednesday. In North American trade, the spot price for an ounce of gold is $1331.17, up 0.50% on the day. On the release front, unemployment claims dropped to 222 thousand, well below the estimate of 230 thousand.

Gold prices remain continue to fluctuate. The base metal has lost 1.3% this week, erasing much of last week’s gains. Concerns that strong US numbers could stoke inflation and more rate hikes sparked the recent turbulence in global stock markets. This has triggered volatility in gold, as gold prices are sensitive to moves (or expected moves) in interest rates. The Fed is currently projecting three rate hikes this year, but if inflation continues to move upwards, many analysts are expecting that the Fed could press the rate trigger four, or even five times in 2018.

The Federal Reserve released the minutes of its January meeting, and as expected, the benchmark rate was left unchanged at a rate between 1.25% and 1.50%. The message from policymakers was that further rate hikes could be in the cards, due to strong economic conditions in the US. In the words of the minutes, policymakers “anticipated that the rate of economic growth in 2018 would exceed their estimates of its sustainable longer-run pace and that labor market conditions would strengthen further”. At the December meeting, the Fed penciled in three rate hikes in 2018, and there was no reference to a quicker pace of hikes in the January minutes. As for inflation, the minutes did not reveal any concern. Most Fed members were of the opinion that inflation would rise towards the Fed target of 2 percent.

 

XAU/USD Fundamentals

Thursday (February 22)

  • 00:15 US FOMC Member Randal Quarles Speaks
  • 8:30 US Unemployment Claims. Estimate 230K. Actual 222K
  • 10:00 US CB Leading Index. Estimate 0.7%. Actual 1.0%
  • 10:00 US FOMC Member William Dudley Speaks
  • 10:30 US Natural Gas Storage. Estimate -121B. Actual -124B
  • 11:00 US Crude Oil Inventories. Estimate 2.2M. Actual -1.6M
  • 12:10 US FOMC Member Raphael Bostic Speaks 

*All release times are GMT

*Key events are in bold

 

XAU/USD for Thursday, February 22, 2018

XAU/USD February 22 at 12:40 EST

Open: 1324.57 High: 1331.37 Low: 1321.03 Close: 1331.17

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1375 1416
  • XAU/USD showed little movement in the Asian and European sessions. The pair has posted gains in North American trade
  • 1307 is providing support
  • 1337 is the next resistance line
  • Current range: 1307 to 1337

Further levels in both directions:

  • Below: 1307, 1285 and 1260
  • Above: 1337, 1375, 1416 and 1433

OANDA’s Open Positions Ratio

XAU/USD ratio is showing strong movement towards long positions. Currently, short positions have a slim majority (51%), indicative of a lack of trader bias as to what direction XAU/USD will take next.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

GBP/USD – Pound Shrugs Off Soft GDP Report

The British pound has posted slight gains in the Thursday session. In North American trade, GBP/USD is trading at 1.3943, up 0.18% on the day. On the release front, British Second Estimate GDP for the fourth quarter remained unchanged at 0.4%, shy of the estimate of 0.5%. Preliminary Business Investment for Q4 dropped to 0.0%, missing the estimate of 0.5%. In the US, unemployment claims dropped to 222 thousand, well below the estimate of 230 thousand.

British GDP for Q4 was a disappointment, but the pound has managed to hold its own against the dollar. GDP was revised downwards to 0.4%, down from 0.5% in the initial estimate. Looking at growth for all of 2017, GDP was revised lower from 1.8% to 1.7%, its worst showing since 2012. The weak readings are being attributed to lower production and weaker consumer spending. Consumers are being squeezed by a weaker British pound as well as high inflation, which is running at a 3% clip, compared to the BoE target of 2%.

The Bank of England has been hinting that it could accelerate the pace of rate hikes, and this was further reinforced on Wednesday, as BoE Chief Economist Andy Haldane said that interest rates might need to climb faster than previously expected, in order to bring down inflation to the BoE’s target of 2 percent. The Bank has been reluctant to raise rates in order to lower inflation, but may be running out of options, as inflation hovers at 3 percent and continues to erode the purchasing power of consumers. The Bank has taken pains to be transparent with the markets, stating recently that the pace of rate hikes could be accelerated and larger hikes than previously forecast could be on the way.

 

GBP/USD Fundamentals

Thursday (February 22)

  • 00:15 US FOMC Member Randal Quarles Speaks
  • 4:30 British Second Estimate GDP. Estimate 0.5%. Actual 0.4%
  • 4:30 British Preliminary Business Investment. Estimate 0.5%. Actual 0.0%
  • 8:30 US Unemployment Claims. Estimate 230K. Actual 222K
  • 10:00 US CB Leading Index. Estimate 0.7%. Actual 1.0%
  • 10:00 US FOMC Member William Dudley Speaks
  • 10:30 US Natural Gas Storage. Estimate -121B. Actual -124B
  • 11:00 US Crude Oil Inventories. Estimate 2.2M. Actual -1.6M
  • 12:10 US FOMC Member Raphael Bostic Speaks 

*All release times are GMT

*Key events are in bold

 

GBP/USD for Thursday, February 22, 2018

GBP/USD February 22 at 11:55 EDT

Open: 1.3917 High: 1.3959 Low: 1.3857 Close: 1.3939

 

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3744 1.3809 1.3901 1.4010 1.4128 1.4271

GBP/USD ticked lower in the Asian and European sessions. The pair has reversed directions and moved higher in North American trade

  • 1.3901 is providing support
  • 1.4010 is the next resistance line

Current range: 1.3901 to 1.4010

Further levels in both directions:

  • Below: 1.3901, 1.3809 and 1.3744
  • Above: 1.4010, 1.4128, 1.4271 and 1.4345

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged in the Thursday session. Currently, short positions have a majority (55%), indicative of trader bias towards GBP/USD continuing to move to lower ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

CAC Ticks Lower, Eurozone CPI Ahead

The CAC index has posted slight losses in the Thursday session. Currently, the index is at 5,299.00, down 0.06% since the close on Wednesday. On the release front, French CPI declined 0.1%, matching the forecast. This marked the first decline in four months.As well, the ECB released the minutes of its January policy meeting. On Friday, the eurozone publishes Final CPI.

It’s been a rough ride February for global stock markets, and the CAC has shed 3.9 percent so far this month. Much of the correction can be attributed to concerns of tighter policy from both the Federal Reserve and the ECB. Ironically, these concerns have been heightened by strong economic data in the eurozone and the US, which have stoked fear of higher inflation and more rate hikes. Analysts are forecasting that the Fed could change its projection of three hikes in 2018, and could press the rate trigger four or five times. As for the ECB, it appears in no rush to raise interest rates anytime soon, and there is little pressure to do so, as there is plenty of slack in the economy. However, the ECB asset purchase program is scheduled to wind up in September, and if eurozone growth remains solid and inflation moves upwards, there will be pressure on the ECB to raise rates in the fourth quarter of 2018 or early in 2019.

The Federal Reserve released the minutes of its January meeting, and as expected, the benchmark rate was left unchanged at a rate between 1.25% and 1.50%. The message from policymakers was that further rate hikes could be in the cards, due to strong economic conditions in the US. In the words of the minutes, policymakers “anticipated that the rate of economic growth in 2018 would exceed their estimates of its sustainable longer-run pace and that labor market conditions would strengthen further”. At the December meeting, the Fed penciled in three rate hikes in 2018, and there was no reference to a quicker pace of hikes in the January minutes. As for inflation, the minutes did not reveal any concern. Most Fed members were of the opinion that inflation would rise towards the Fed target of 2 percent.

 

Economic Calendar

Thursday (February 22)

  • 2:45 French Final CPI. Estimate -0.1%. Actual -0.1%
  • 7:30 ECB Monetary Policy Meeting Accounts

Friday (February 23)

  • 5:00 Eurozone Final CPI.  Estimate 1.3%

*All release times are GMT

*Key events are in bold

CAC, Thursday, February 22 at 9:40 EDT

Open: 5,271.00 High: 5,296.30 Low: 5,253.30 Close: 5,299.00

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Confusion reigns

Confusion reigns

In a market starved for significant news, the FOMC minutes provided just enough talking points to keep the dollar bid as US bond yields nudged towards crucial resistance levels.However, the Feds assortment of views on wage growth suggests the FOMC remains pliable during the transition phase from Yellen to Powell. In other words, the Feds stay in wait and see mode regarding inflation.

Of course, the market latched on to the dovish stuff as traders were partial to sell the dollar, but as is so often the case when interpreting the Feds exercise in verbal gymnastics, the market got it wrong. The FOMC minutes were eventually deemed slightly more hawkish after suggesting economic growth will surpass their estimates which caused STIRT traders to nudge rate hike expectations higher through 2018  and providing a bump to dollar sentiment. But given the lack of follow-through, the jury remains out.

The exciting part of the equation today will be the return of China investors which should provide a spark to regional sentiment. But the jury is out on the currency markets and in particular USDJPY which remains the primary vehicle to express currency sentiment.

So there lies the debate,  interest rate hawks preach the FOMC had not seen last week’s sharp inflation report while the doves suggest a need for a string of convincing inflation prints before moving to the four rate hike camp.

Bond Markets

The bond market is confused, but as my first boss on the BondDesk was always quick to remind me, when in doubt Sell.
Oil prices

Tumbling oil prices got a reprieve at the end of the day after American Petroleum Institute data showed a drop of 0.907 million barrels in US crude inventories. Given all the noise about a shale production ramp, Traders were expecting an increase in the warehouse when in reality improved pipeline infrastructure to the Gulf coast and the decreased supply via TransCanada’s Keystone pipeline, sent Cushing inventories tumbling.But the firming dollar continues to thwart investor sentiment despite the bullish inventory data.  By no means is the dollar returning to form so this upbeat inventory data could have some legs.

Gold Prices

It was a  meltdown in Gold markets overnight, and I’m not talking about scrap prices. But in reality, this should provide Gold investors with another opportunity to re-engage as the Fed fell well short of confirming a 4th rate hike in 2018. The minutes were more balanced in my view as the recent uptick in volatility will have as much bearing on Fed policy decision as the subtle rise in inflation.

G-10

The Euro

Disappointing price action from the long perspective continues to weigh on sentiment; bullish views continue to be challenged ahead of the Italian elections, as near-term convictions turn neutral to slightly bearish

The Japanese Yen

There remain substantial offers between 107.50-108 levels that are providing a cap on USDJPY, but Traders remains exceptionally cautious in either direction despite increasing signals for a structural demise in USD sentiment.While fiscal stimulus looks good on paper, we’re entering uncharted territory as the Fed pares back bond purchases while the Treasury issues absurd amounts of debt.
Malaysian Ringgit

We should anticipate more liquidity coming back to the market as mainland investor return. While we’re nowhere near a make or break scenario for the Ringgit, short-term sentiment remains tarnished by an unexpectedly faster rise in US bond yields. While this is mildly negative for local opinion, the main issue is investors are growing increasingly concerned about a quicker pace of interest rate normalisation from the Fed which could trigger regional capital outflow.

The FOMC minutes served up little more than a plate of confusion last night, so I expect G-10 along with Asia FX to remain in a state of limbo until Fed Chair Powell takes the podium later this month.

Gold in Holding Pattern Ahead of Federal Reserve Minutes

Gold is steady in the Wednesday session, following sharp losses on Tuesday. In North American trade, the spot price for an ounce of gold is $1329.08, down 0.05% on the day. On the release front, all eyes are on the Federal Reserve, which will release the January minutes later in the day. Earlier, Existing Home Sales disappointed, dropping to 5.38 million. This was well short of the estimate of 5.61 million. On Thursday, the US will release unemployment claims.

Gold prices remain under pressure, as the metal has lost 1.5% this week, erasing much of last week’s gains. Concerns that strong US numbers could stoke inflation and more rate hikes sparked the recent turbulence in global stock markets. This has triggered volatility in gold, as gold prices are sensitive to moves (or expected moves) in interest rates. The Fed is currently projecting three rate hikes this year, but if inflation continues to move upwards, many analysts are expecting that the Fed could press the rate trigger four, or even five times in 2018. Traders should be prepared for some movement from gold later in the North American session, as the minutes could provide some clues regarding future rate policy.

It’s been a busy start for Jerome Powell, who has just commenced his stint as chair of the Federal Reserve. Strong US data in recent weeks has raised speculation that the Fed may need to accelerate the pace of interest rate hikes in 2018.  Meanwhile, concern over higher inflation and more rate hikes sent the stock markets into a frenzy earlier in February. Powell sought to reassure the markets that the Fed was monitoring the situation, but it’s doubtful that the Fed can do much to prevent volatility in the markets.

XAU/USD Fundamentals

Wednesday (February 21)

  • 9:45 US Flash Manufacturing PMI. Estimate 55.4. Actual 55.9
  • 9:45 US Flash Services PMI. Estimate 53.8. Actual 55.9
  • 10:00 US Existing Home Sales. Estimate 5.61M. Actual 5.38M
  • 14:00 US FOMC Meeting Minutes

Thursday (February 22)

  • 8:30 US Unemployment Claims. Estimate 230K

*All release times are GMT

*Key events are in bold

XAU/USD for Wednesday, February 21, 2018

XAU/USD February 21 at 12:35 EST

Open: 1329.66 High: 1333.04 Low: 1325.27 Close: 1329.08

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1375 1416
  • XAU/USD posted losses in the Asian and European sessions. The pair continues to lose ground in North American trade
  • 1307 is providing support
  • 1337 has switched to a resistance role following losses from XAU/USD on Tuesday
  • Current range: 1307 to 1337

Further levels in both directions:

  • Below: 1307, 1285 and 1260
  • Above: 1337, 1375, 1416 and 1433

OANDA’s Open Positions Ratio

XAU/USD ratio is showing slight movement towards short positions. Currently, short positions have a majority (60%), indicative of trader bias towards XAU/USD breaking out and moving lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

GBP/USD – Strong UK Employment Numbers Fail to Rally Pound, Fed Minutes Loom

The British pound has posted losses in the Wednesday session. In North American trade, GBP/USD is trading at 1.3946, down 0.37% on the day. On the release front, British employment numbers were solid. Wage growth remained at 2.5%, matching the forecast. Unemployment rolls declined 7.2 thousand, crushing the estimate of a 2.3 thousand gain. However, the unemployment rate ticked up to 4.4%, above the estimate of 4.4%. In the US, the key event is the Federal Reserve minutes from the January meeting. Earlier, Existing Home Sales disappointed, dropping to 5.38 million. This was well short of the estimate of 5.61 million. On Thursday, the UK releases revised GDP for the fourth quarter as well as Preliminary Business Investment. The US will publish unemployment claims.

The Bank of England has been hinting that it could speed up the pace of rate hikes, and this was further reinforced on Wednesday, as BoE Chief Economist Andy Haldane said that interest rates might need to climb faster than previously expected, in order to bring down inflation to the BoE’s target of 2 percent. The Bank has been reluctant to raise rates in order to lower inflation, but may be running out of options, as inflation hovers at 3 percent and continues to erode the purchasing power of consumers. The Bank has taken pains to be transparent with the markets, stating recently that the pace of rate hikes could be accelerated and larger hikes than previously forecast could be on the way.

It’s been a busy start for Jerome Powell, who has just commenced his stint as chair of the Federal Reserve. Strong US data in recent weeks has raised speculation that the Fed may need to accelerate the pace of interest rate hikes in 2018. The Fed is currently projecting three rate hikes this year, but if inflation continues to move upwards, many analysts are expecting that the Fed could press the rate trigger four, or even five times in 2018. Meanwhile, concern over higher inflation and more rate hikes sent the stock markets into a frenzy earlier in February. Powell sought to reassure the markets that the Fed was monitoring the situation, but it’s doubtful that the Fed can do much to prevent volatility in the markets.

 

GBP/USD Fundamentals

Wednesday (February 21)

  • 4:30 British Average Earnings Index. Estimate 2.5%. Actual 2.5%
  • 4:30 British Claimant Count Change. Estimate 2.3K. Actual -7.2K
  • 4:30 British Public Sector Net Borrowing. Estimate -11.5B. Actual -11.6B
  • 4:30 British Unemployment Rate. Estimate 4.3%. Actual 4.4%
  • 9:15 British Inflation Report Hearings 
  • 9:45 US Flash Manufacturing PMI. Estimate 55.4. Actual 55.9
  • 9:45 US Flash Services PMI. Estimate 53.8. Actual 55.9
  • 10:00 US Existing Home Sales. Estimate 5.61M. Actual 5.38M
  • 14:00 US FOMC Meeting Minutes

Thursday (February 22)

  • 4:30 British Second Estimate GDP. Estimate 0.5%
  • 4:30 British Preliminary Business Investment. Estimate 0.5%
  • 8:30 US Unemployment Claims. Estimate 230K

*All release times are GMT

*Key events are in bold

 

GBP/USD for Wednesday, February 21, 2018

GBP/USD February 21 at 12:10 EDT

Open: 1.3996 High: 1.4009 Low: 1.3994 Close: 1.3946

 

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3744 1.3809 1.3901 1.4010 1.4128 1.4271

GBP/USD edged lower in Asian trade and posted stronger losses in the European session. GBP/USD has posted small gains in North American trade

  • 1.3901 is providing support
  • 1.4010 is the next resistance line

Current range: 1.3901 to 1.4010

Further levels in both directions:

  • Below: 1.3901, 1.3809 and 1.3744
  • Above: 1.4010, 1.4128, 1.4271 and 1.4345

OANDA’s Open Positions Ratio

GBP/USD ratio is almost unchanged in the Wednesday session. Currently, short positions have a majority (57%), indicative of trader bias towards GBP/USD continuing to move to lower ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

DAX Under Pressure, Investors Eye Fed Minutes

The DAX index has posted losses in the Wednesday session. Currently, the index is trading at 12,428.50 down 0.48% since the Tuesday close. On the release front, German and Eurozone Manufacturing PMIs slowed in January. The German PMI dipped to 60.3, shy of the estimate of 60.6 points. It was a similar story with the Eurozone PMI, which dropped to 58.5, shy of the estimate of 59.2 points. In the US, the key event is the Federal Reserve minutes from the January meeting.

It continues to be a blue February for the DAX, which has declined 6.2% so far this month. The correction on the US stock markets has sent European markets lower, although the DAX managed to gain ground last week, as European corporate earnings were generally strong. Will the stock market volatility resume? The markets are keeping a close eye on the Fed minutes, which could provide a hint of future rate policy. . Recent US numbers have been strong, and inflation indicators have been pointing upwards. This has raised concerns that the Fed may accelerate its pace of hikes, which triggered a sharp correction in global stock markets. The new chair of the Fed, Jerome Powell has tried to reassure the markets that the Fed is monitoring the situation, but it’s doubtful that the Fed can do much to prevent volatility in the markets.

It’s been a wild, wild ride for Bitcoin, the most popular virtual currency. Bitcoin has fluctuated between $900 and $19,000 over the past years. These wild swings have drawn the attention of policymakers and lawmakers, as there are growing concerns that virtual currencies could have a negative economic impact. France and Germany want to put virtual currencies on the agenda at the next G-20 meeting, and there is bipartisan support in Congress to adopt new rules to regulate virtual currencies. However, Draghi poured cold water on any ECB involvement, saying that it was not the ECB’s responsibility to ban or regulate Bitcoin. Draghi added that the ECB was exploring the use of blockchain, a digital technology to monitor bitcoin transactions.

Economic Calendar

Wednesday (February 21)

  • 3:30 German Flash Manufacturing PMI. Estimate 60.6
  • 4:00 German Flash Services PMI. Estimate 56.9
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 59.2
  • 4:00 Eurozone Flash Services PMI. Estimate 57.7
  • 14:00 US FOMC Meeting Minutes

*All release times are EST

*Key events are in bold

 

DAX, Wednesday, February 21 at 8:50 EDT

Open: 12,451.96 High: 12,512.00 Low: 12,426.50 Close: 12,428.50

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

USD/CAD – Canadian Dollar Subdued Ahead of Fed Minutes

The Canadian dollar has recorded slight losses in the Tuesday session. Currently, USD/CAD is trading at 1.2669, up 0.16% on the day. On the release front, there are no Canadian releases on the schedule. In the US, the key event is the Federal Reserve minutes from the January meeting. We’ll also get a look at Existing Home Sales, which are expected to climb to 5.61 million. On Thursday, Canada releases retail sales reports and the US will publish unemployment claims.

The week started on a sour note for Canadian indicators, as Wholesales Sales declined 0.5%, short of the estimate of 0.4%. It marked the first decline in three months. The markets are expecting another soft release from Core Retail Sales, a key barometer of consumer spending. The indicator posted a strong gain of 1.6% in December, but is forecast to slow to just 0.1% in January. If consumer spending posts a weak reading, the Canadian dollar could lose more ground. The pair is under pressure, and has shed 1.0% so far this month.

It has been an eventful few weeks for Jerome Powell, who has just commenced his stint as chair of the Federal Reserve. Strong US data in recent weeks has raised speculation that the Fed may need to accelerate the pace of interest rate hikes in 2018. The Fed is currently projecting three rate hikes this year, but if inflation continues to move upwards, many analysts are expecting that the Fed could press the rate trigger four, or even five times in 2018. Meanwhile, concern over higher inflation and more rate hikes sent the stock markets into a frenzy earlier in February. Powell sought to reassure the markets that the Fed was monitoring the situation, but it’s doubtful that the Fed can do much to prevent volatility in the markets.

 

 

USD/CAD Fundamentals

Wednesday (February 21)

  • 9:45 US Flash Manufacturing PMI. Estimate 55.4
  • 9:45 US Flash Services PMI. Estimate 53.8
  • 14:00 US FOMC Meeting Minutes

Thursday (February 22)

  • 8:30 Canadian Core Retail Sales. Estimate 0.1%
  • 8:30 Canadian Retail Sales. Estimate 0.0%

*All release times are GMT

*Key events are in bold

 

USD/CAD for Wednesday, February 21, 2018

USD/CAD, February 21 at 7:40 EST

Open: 1.2548 High: 1.2671 Low: 1.2640 Close: 1.2669

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2351 1.2494 1.2630 1.2757 1.2855 1.2920

USD/CAD has posted small gains in the Asian and European sessions

  • 1.2494 is providing support
  • 1.2630 is a weak resistance line
  • Current range: 1.2494 to 1.2630

Further levels in both directions:

  • Below: 1.2630, 1.2494, 1.2351 and 1.2190
  • Above: 1.2757, 1.2855 and 1.2920

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement in the Wednesday session. Currently, short positions have a slender majority (52%), indicative of slight trader bias towards USD/CAD reversing directions and moving lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

BoE Hearing and Fed Minutes in Focus

US Futures Continue to Pare Last Week’s Gains

US equity markets are expected to open in the red again on Wednesday, tracking losses in Europe as stocks continue to pare last week’s strong rebound.

It’s been a relatively quiet start to the morning and the week, with the bank holiday in the US and Canada contributing to this. The European session has been dominated by economic data releases so far and that’s likely to continue, with flash manufacturing and services data due from the US shortly after the open. It’s the FOMC minutes that will be released later in the day though that will likely be the standout event from a US perspective, particularly as the statement caused quite a stir at the end of January.

US Yield Curve Now (Orange) and on 29 January 2018 (Purple)

Source – Thomson Reuters Eikon

The sell-off in the markets may have come a couple of days later but part of the initial trigger was a more hawkish sounding Fed, with the jobs report then being the straw that broke the camel’s back two days later. While the minutes may not generate quite the same response, traders will likely monitor what they say very closely for signs that policy makers are now leaning more towards three to four rate hikes this year, rather than two or three.

EUR/USD – Euro Ticks Lower as German Manufacturing PMI Softens

GBP Slips as Unemployment Ticks Higher

Sterling is coming under a bit of pressure this morning after UK jobs data for the three months to December showed wages still growing at a moderate pace and unemployment ticking up to 4.4%. While a higher reading on wage growth may have triggered a more bullish response from the pound, the data turned out to be quite insignificant as it’s unlikely to change the views at the Bank of England.

UK Unemployment Rate

Wages have been slowly ticking higher recently and they could continue to do so as workers demand more due to the higher cost of living and a tight labour market. The move higher in the unemployment rate won’t be a concern at this moment with it potentially being a one-off move and still very low. As long as inflation remains at upper range of what is deemed acceptable, the central bank seems intent on raising rates at least once more this year, despite the temporary factors driving it and economic uncertainty that lies ahead.

Yield-o-Mania

BoE Inflation Report Hearing Eyed as Markets Price in Rate Hikes

Members of the Monetary Policy Committee including Governor Mark Carney will appear before the Treasury Select Committee later on today, during which they will be questioned on their latest inflation report forecasts and expectations for interest rates going forward. While it’s always interesting to get the views of policy makers and the pound will likely be volatile throughout, I wonder how much of what they have to say will now already be priced in, with at least one rate hike now expected this year.

GBPUSD Daily Chart

OANDA fxTrade Advanced Charting Platform

With that in mind and with Brexit transition negotiations likely to dominate the next month, we could see the pound lose some of the momentum that’s been gathering over the last six months or so. It’s recent failed to make new highs on two occasions against the dollar and it’s also slipping against the yen in a possible sign that traders are beginning to lock in profits ahead of what could be a difficult month.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.