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USD Going Nowhere As Market Digests FOMC Minutes

By Swissquote Bank LtdMarket OverviewFeb 18, 2016 05:14AM ET
USD Going Nowhere As Market Digests FOMC Minutes
By Swissquote Bank Ltd   |  Feb 18, 2016 05:14AM ET
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Market Brief

In Asia, the Australian dollar felt the heat as the latest job report surprised substantially to the downside. The unemployment rate returned to 6.00%, missing the median forecast of 5.8%, as employment fell 7.9k versus expectations of a 13k increase. However, we believe it is a little too early to draw any alarming conclusions as the overall trend points towards an improving job market; this may be simply viewed as a temporary setback. The next release, due on March 17th, will therefore be closely watch by market participants as another disappointment could indicate a trend reversal. AUD/USD fell 0.65% to 0.7134 after the release before stabilising at around 0.7150. As I wrote already in yesterday’s snapshot, the bias in AUD/USD remains on the downside as the US dollar appears to have been oversold these past few weeks.

G10 Advancers - Global Indexes
G10 Advancers - Global Indexes

Emerging market currencies printed sharp gains overnight on improving global risk sentiment. The Brazilian real was the biggest winner as the BRL surged almost 2% against the US dollar with USD/BRL falling to below 4.00. The Colombian and the Chilean pesos rose 1.60% and 1.25% against the greenback, while the Mexican peso gained 0.55%. Asia’s emerging market currencies did not take advantage of the recovering risk sentiment as Chinese worries leave the door wide open for competitive devaluation by most Asian regional central banks. The People’s Bank of China set the USD/CNY fix slightly lower to 6.5152 from 6.5237.

In Wall Street, US stocks posted the first 3-day winning streak since December 2015 as recession fears fade. The S&P 500 rose 1.65%, the NASDAQ jumped 2.21%, while the Dow Jones 30 was up 1.59%. In Asia, with the exception of mainland Chinese markets, equity indices were trading in positive territory on the positive Wall Street lead. The Japanese Nikkei and the TOPIX settled up 2.28% and 2.25% respectively. In Hong Kong the Hang Seng rose 2.12%, while in Singapore the STI jumped 1.97%. In China, equities were trading slightly lower with the Shenzhen and Shanghai Composite down -0.16% and -0.34%. In Europe, futures are pointing to a higher open. However, the market has come to the point where it is wondering whether this is time to rush to buy stock, and to ride the potential upcoming bull market, or to remain cautious as the recent recovery may be short lived.

Overnight, the US dollar moved sideways as traders digested the minutes of the FOMC meeting. The minutes revealed that most Fed members were worried that the current global market turmoil and global slowdown could impact the US domestic economy and therefore derail the Fed rate path. Overall, we have the feeling that Fed members’ confidence in the strength of the US economy is eroding as they appear to be more and more cautious; especially when you compare the January minutes with the pre-rate hike speeches delivered by the most hawkish member. EUR/USD was treading water at around 1.1130.

Today traders will be watching Swiss trade balance; CPI report from France and Sweden; unemployment rate, retail sales and gold and forex reserve from Russia; Philadelphia Fed Business outlook, initial jobless claims, leading index and Fed Williams’s speech in Los Angeles.

Today's Calendar
Today's Calendar

Currency Tech
R 2: 1.1376
R 1: 1.1261
CURRENT: 1.1138
S 1: 1.1070
S 2: 1.0711

R 2: 1.4668
R 1: 1.4591
CURRENT: 1.4283
S 1: 1.4150
S 2: 1.4081

R 2: 123.76
R 1: 115.17
CURRENT: 113.68
S 1: 110.99
S 2: 105.23

R 2: 1.0257
R 1: 1.0074
CURRENT: 0.9915
S 1: 0.9847
S 2: 0.9660

USD Going Nowhere As Market Digests FOMC Minutes

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USD Going Nowhere As Market Digests FOMC Minutes

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