Markets Mark Time Ahead of Fed

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Market Drivers March 19, 2019
Majors tread water
UK labor data beats
Nikkei 0.08% Dax 0.61%
Oil $59/bbl
Gold $1305oz.

Europe and Asia:
GBP UK Average earnings 3.4% vs. 3.2%
GBP UK Unemployment rate 3.9% vs. 4.0%

North America:
No data

It’s been a slow listless night of trade in FX with majors contained to 20 pip ranges for most of Asian and European dealing as markets awaited the FOMC announcement tomorrow while the rest of the eco calendar was barren.

In Australia, the release of the RBA minutes confirmed that the central bank was firmly committed to a neutral stance, but that was actually viewed as a positive sign for Aussie as many traders were fearful that the RBA may begin a new cycle of easing given the slowdown in economic activity in Asia. However, as we noted yesterday the very latest data out of Asia suggests that demand has stabilized and that is helping risk currencies such as AUDUSD to find a tradable bottom as well. The pair continues to hold at the .7100 level for the second day in a row and if it can close above it, the bulls will try to run it towards the key resistance at .7200 as the week progresses.

In UK the Brexit saga appears to be at a standstill with PM May unable to bring her deal for yet another Parliamentary vote this week. The conventional wisdom is there will be no further vote in UK Parliament while Ms. Mau heads to EU summit this Thursday. Meanwhile, the UK labor data came in surprisingly brisk with average wages rising 3.4% vs. 3.2% eyed while the unemployment rate dropped to 3.9% from 4.0% forecast.

The jump in UK earnings gains was the biggest since 2008 and suggests that the underlying demand continues to remain robust despite the anxiety surrounding Brexit. The news, in fcat, reaffirms the bullish view that any soft-Brexit outcome should provide a further boost to the pound taking it through the 1.3500 figure as attention turns back to economic matters. For now, however, the pair saw very little reaction trading at 1.3270 for most of London morning as markets awaited the next move in the Brexit saga.

In North America today the eco calendar is barren and volatility remains subdued. However, the buck continues to trade with a mild offer tone, especially against the yen where the overnight flows took the pair to 111.15 before finding some support. There are not major drivers of trade in FX right now, but pre-FOMC positioning is clearly trying to nudge the greenback lower and the shorts could test the 111.00 figure in USDJPY while probing 1.1400 in EURUSD as the day proceeds.

Boris Schlossberg
Managing Director

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