Market Drivers March 20, 2018
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.
USD/JPY 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 USD/JPY 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.