The U.S. dollar rose versus yen during the latter part of the New York session, after the minutes of the FOMC January rate setting and monetary policy meeting were published. The overall consensus, reached by the FX analyst community after the publication was broadcast, concluded that the minutes were not dovish, perhaps leaning towards a hawkish stance.
The FOMC appeared to suggest they are considering at least one other interest rate rise, during 2019. They noted the strong economy and robust jobs market. Before the minutes were released, the U.S. dollar was trading down versus the euro and other peers. Once published, USD clawed back the majority of the losses versus its currency peers, registered earlier during the day’s trading sessions.
At 21:15pm U.K. time, EUR/USD traded at 1.133, down 0.05% after oscillating in a tight range during the day’s sessions, which saw the major currency pair breach R1, earlier in the session. USD/JPY had oscillated in a narrow range, with a bias to the upside and reaching R1, before falling back to the daily pivot point. After the minutes were released, the currency pair regained position close to R1, whilst trading above the 110.0 handle at 110.8, up 0.20%.
After trading down marginally before the minutes were published, the leading U.S. equity indices closed out the New York session with a modest recovery. The DJIA closed up 0.24%, SPX up 0.18% and the NASDAQ closed out up 0.03%. The tech heavy index had whipsawed in a tight range during the New York session, before posting the modest gain.
After eight Labour Party MPs stunned their party and parliament by resigning during Monday and Tuesday, in order to form an independent group of MPs, three Tory party MPs also resigned on Wednesday to join the private group, who are yet to form as party, therefore, its funding remains secret. The collective are claiming to represent a “centrist alternative” to the current U.K. parliamentary system and status quo, but are yet to provide any form of manifesto, instead preferring to rely on warm, management style speak, to entice support.
The loss of governing Tory MPs was regarded by market analysts as far more serious than Labour Party MPs falling out, which they do on a regular basis. The loss of support by any more Tory MPs could leave the government in a precarious position, if a vote on no confidence is called by the Labour Party leader. Brexit news concerned Theresa May once again putting her case forward in Brussels for changes to the withdrawal agreement, by way of the backstop being removed.
Bloomberg were reporting, late on during Wednesday evening, that the E.U. have made a proposal to the U.K. prime minister that she must get Parliamentary approval for any withdrawal agreement alterations, before the E.U. will consider any changes at a final summit. If this report proves to be correct, then the Tory party will attempt to use it as proof that the E.U. is prepared to bend and compromise. However, in reality the E.U. have simply hit the ball back to the U.K. side of the net, as the position remains unchanged.
GBP/USD oscillated in a tight range during the day’s trading sessions, as sterling overall remained unaffected by both the resigning MPs and Brexit issues. At 21:50pm GBP/USD traded down 0.13% holding position above the 1.300 round number and handle. Focus will move to actual fundamental analysis regarding the U.K. during the London session on Thursday, as the latest public sector net borrowing requirement will be published by the U.K. authorities. The forecast from Reuters is -£10b in January, from £3b previously in December. Such a figure (if met), could impact on the value of sterling. The U.K. FTSE closed the day out up 0.69%. The key Eurozone equity markets closed up; DAX up 0.82% and CAC up 0.69%.
Thursday is a busy day for economic calendar news and releases, which FX traders should remain vigilant of. A raft of PMIs relation to: Germany, France and the wider Eurozone will be published, with no surprises forecast. In the New York trading session, there’s a significant volume of data which will be delivered, including: the weekly and ongoing jobless claims, durable goods orders, various PMIs, home sales and energy inventories. Due to such a packed programme of data releases, both the USA equity indices and the U.S. dollar could come under intense speculation, during the trading session.
Late evening the latest Japanese inflation data will be published, year on year the CPI is forecast to fall to 0.20% in January. Yen may could under intense speculation if this figure matches the expectation, as FX traders may quickly deduce that the Bank of Japan has more reason and ammunition, to justify their continued, ultra loose, monetary stimulus.
