Market Drivers September 21, 2017
RBA’s Lowe no hike in sight
BOJ rates on hold
Nikkei 0.18% Dax 0.33%
Europe and Asia:
GBP UK PSNB 5.89B vs. 6.05B
USD Weekly jobless 08:30
USD Philly Fed 08:30
The dollar didn’t see much follow through in Asian and early European trade after yesterday’s hawkish FOMC presser during which Chairwoman Yellen reaffirmed the central bank’s intent to hike rates in December.
Most of the major essentially stalled at their post news levels with EURUSD trading on either side of 1.1900, cable bobbing around the 1..3500 figure and USDJPY having difficulty breaking the 112.50 barrier.
There was little newsflow in the session with Bank of Japan essentially reiterating its easy money policy, but not adding further stimulus to system at the moment. That may have capped the move in the pair and it was also constrained by some risk aversion flows as UN debated the Iran issue.
USDJPY has put in a strong recovery rally over the past two weeks, rising more than 400 pips off the lows as it followed US yields higher. Now, however, it faces formidable resistance at the 112.50-114.50 corridor and may consolidate a bit at these levels. Given that the market now firmly expects the Fed to hike rates, the pair could only face negative surprises from the economic data. Still, sentiment toward the pair has improved markedly and has clearly changed from “sell the rally” attitude to “buy the dip”.
Elsewhere the Aussie was hit a bit in Asian session trade as RBA Governor refused to play “follow the Fed” and stated that while he does see rate eventually rising, they won’t go up anytime soon. Mr. Lowe’s remarks demonstrate the very uneven pace of monetary tightening amongst the G-11 policymakers. While most central bankers, clearly wish to return to normalization, the tepid pace of growth, depressed wages, and muted inflation are capping and policy actions for now and that stutter step dynamic could continue for the foreseeable future.