Dollar Steady As FOMC Looms

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Market Drivers March 20, 2018
UK Inflation misses
USDJPY round trips towards 106.00 on Amamiya comments
Nikkei -0.47% Dax -0.17%
Oil $63/bbl
Gold $1315/oz.
Bitcoin $8300

Europe and Asia:
GBP UK CPI 2.7% vs. 2.8%
EUR ZEW 5.1 vs. 13.0

North America:
CAD Wholesale Sales 8:30

It’s been a quiet dealing session in Asia and early European trade with little flow to move the market and lots of jumpy jagged price action in both cable and yen.

USDJPY was well bid all through Asia morning and afternoon rising to 106.60 towards the end of the session, but then dropped like a stone on comments by BOJ member Amamiya who stated that he would rule out adjusting rates before BOJ reached its 2% inflation target.

The algos instantly interpreted that comment as a decidedly hawkish tilt by BOJ, but in fact, Mr. Amamiya was simply restating Mr. Kuroda’s long-held position and USDJPY found support ahead of 106.00 level. Sill, the pair is hampered by risk aversion flows from lower equity markets and if US equities continue to slide today, 106.00 will likely be tested.

In the UK the inflation data came in a bit soft at 2.7% vs. 2.8% eyed on CPI, but cable remained well bid, as the positive Brexit news trumps all. The pair has buyers ahead of the 1.4000 level and any negative news is viewed as a buy the dip opportunity for now.

Finally, in Europe, the ZEW survey printed much weaker than forecast at 5.1 vs. 13.0 expected as tariff threats and higher exchange rates soured investor attitudes. The pair dipped towards the 1.2300 figure but held just above it ahead of the NY trade.

With no US economic data on the docket today, FX will likely take its cue from equities and fixed income markets. The dollar remains in wait and see mode ahead of tomorrow’s FOMC meeting, with everyone awaiting the reveal of the dot plot and the tone of the presser. Barring any unexpected news bombs, the ranges should hold as traders gear up for the marquee event of the week tomorrow.

Boris Schlossberg
Managing Director

One thought on “Dollar Steady As FOMC Looms”

  1. Hi, it would be very interesting to read your take on the fact that for example the Spainish 10y bond and Italian 10y bond are cheaper than US 10y bond?
    The fundamentals such us unemployment ratios, GDP/cap, political turmoil, banks’ bad debt ratios and taxation burdens all point to the reverse relation, right?
    The Draghi-effect is perhaps vastly underestimated, he has put the EU governments on life-support liquidity funding. He cannot taper QE, can he?
    No Bid?

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