It has been a mostly quiet session in the FX markets, with the US$ little changed against most counterparts as traders remain cautious ahead of today’s FOMC meeting and trade talks between China and the US. The Brexit debate has been continuing in the UK Parliament, ensuring that Sterling was choppy for much of the session, before eventually heading lower in late US trade after several amendments to Theresa May’s plan failed to pass through the parliament. The market was hoping that the MPs would vote to avoid a no-deal Brexit but that did not happen and the EU was hot off the mark to shoot down any renewal of negotiations with the UK. Where next? Who knows!
Elsewhere stocks ended mixed, with the DJI trading mildly higher, while the S+P and Nasdaq lost a bit of ground. Apple released its results after the markets closed and reported an EPS of $4.18 vs $4.17 estimate on revenue of $84.3B vs $84B estimate. The main mover of the day has been Oil (WTI: +2.4%), which moved higher due to the uncertainties of supply from Venezuela, and Gold, which is up by $8oz (0.65%), an 8 month high. Note that Iron Ore is also up by another 1.5%, which should help to underpin the Aud$.
Wednesday will begin with the Japan Retail Trade and the Australian CPI (exp 0.4%mm, 1.7%yy; Trimmed mean, exp 1.8%yy). Europe will then follow with the German Consumer Confidence and CPI (exp -0.8%mm, 1.6%yy; HICP, exp 1.8%yy) and the EU Economic Sentiment Indicator, Industrial Confidence, Services Sentiment and Business Climate, although most of the session is likely to be spent disseminating the Brexit vote. The main event of the day will be the FOMC Meeting, although no change to policy is expected this month and the interest will lie in the wording of the Statement and in J.Powell’s Press Conference. In particular, traders will be looking to see if the Fed intends to stop reducing the size of the balance sheet. If they do stop, this will equate to an easier monetary policy and will likely send the US$ lower. If the balance sheet does continue to be reduced at its current pace, by not reinvesting the proceeds of maturing bonds, then the dollar should head higher.
Also from the US today, we will see the January ADP Jobs data, Pending Home Sales and the EIA Crude Oil Stocks Weekly Change.
Economic data highlights will include:
Wed: Japan Retail Trade, Australian CPI, German Consumer Credit, UK Consumer Credit, Mortgage Approvals, German CPI, US Q4 Preliminary GDP, ADP Jobs data, Pending Home Sales, FOMC Interest Rate Decision
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