Market Drivers Mar. 16, 2016

UK Labor Data Better
Kuroda stokes the yen
Nikkei -0.83% Dax 0.80%
Oil $37/bbl
Gold $1233/oz

Europe and Asia:
UK Claimant Count -18K vs. -9K
Average Wage 2.2% vs. 2.1%
ILO Unemployment 5.1% vs. 5.1%

North America:
USD CPI 8:30
USD Housing Starts 8:30

Currency markets were relatively calm ahead of today key FOMC meeting with majors tracing out narrow ranges in subdued trade. The one exception was USD/JPY which gained more than 70 pips off the lows as the pair tested resistance ahead of the 114.00 figure.

The push higher in USD/JPY was driven by a fresh set of comments from BOJ governor Kuroda who once again testified in the Japanese Diet and left open the possibility of further rate cuts should they be necessary.

As we noted yesterday, for now the BOJ appears to be content to maintain the status quo as policymakers wait for the Fed to make their move. The FOMC meeting today will be scrutinized very heavily by the market not so much for any policy action as almost no one expects any rate hikes, but rather for the tone of the presser. Traders will want to know if Ms. Yellen is open to the prospect of any rate hikes by the summer before the election season sidelines the Fed until the end of the year.

Vice Chairman Fischer has been quite vocal in the need to continue normalizing monetary policy and with financial markets more calm now the Fed may be open to acting as soon as April to establish control over rates.

Ahead of the FOMC meeting the market will get a glimpse of the CPI data which is expected to drop from 0.3% last month to 0.1%. However, if the numbers print hotter, the news will only stoke the market to push USD/JPY towards the 114.00 barrier ahead of Ms. Yellen press conference.

Elsewhere, the only data of note was the UK Labor numbers which came in better than expected with claimant count dropping by -18K vs -9K eyed and wages rising to 2.2% from 2.1% forecast. Sterling saw a very modest boost post data bouncing off the 1.4100 level, but it continues to be pressured by concerns over Brexit and that issue is likely to overshadow any fundamental for the time being. Given cablee relative weakness any hawkish message from the Fed could quickly send the pair towards the 1.4000 figure as the day proceeds.

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