The US dollar continued to consolidate against most of its FX trading counterparts while weakening against some, as the FOMC statement is drawing near. Data from the US economy has been mixed, with building permits coming in slightly better than expected at 1.09M versus the 1.07M estimate and housing starts falling short at 0.90M. The Fed is widely expected to drop the “can be patient” phrase in discussing policy normalization, which could mean that they are looking to hike rates possibly in June. If they retain this phrase, market participants could doubt that tightening is bound to take place soon and lead to a selloff for the dollar.
The euro recovered to most of its FX trading rivals, as data from the euro zone came in mixed. The German ZEW index ticked up from 53.0 to 54.8, short of the estimate at 58.9. Meanwhile, the region’s ZEW index came in stronger than expected at 62.4, up from the previous 52.7reading. Euro zone final core CPI was upgraded from 0.6% to 0.7% as well. There are no major reports lined up from the region today.
FX Trading News
The pound resumed its drop to its FX trading counterparts, even though there were no major reports released from the UK. It appears that traders are starting to doubt that the BOE could stay optimistic, given the recent downturn in data. The minutes of the latest policy meeting are up for release today, along with the UK jobs report. These could provide better clues on what the BOE’s monetary plans might be and determine where the pound could be headed.
The franc continued to consolidate to the dollar and lost ground to the euro, despite the lack of data from Switzerland. Only the Swiss ZEW economic expectations report is due today and any improvements from the previous -73.0 figure might keep the franc afloat.
The yen managed to hold on to its recent FX trading gains and go for more, as the BOJ refrained from adding stimulus. BOJ Governor Kuroda admitted that price levels could fall further but that this wouldn’t prevent Japan from achieving its 2% inflation target in a couple of years. He added that wage hike talks are ongoing and that this might boost spending and inflation later on.
The comdolls chalked up a bit more weakness in recent FX trading, as the RBA minutes revealed that another rate hike was almost implemented. The New Zealand dairy auction showed an 8.8% fall in prices, due partly to the contamination threat on Fonterra recently. Canadian wholesale sales and US oil inventories data could influence Loonie price action later today.
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