Yen Gains On Fed, Commodity-Linked Aussie Extends Gains, Oil Inches Up

As Asian traders were heading home for the day, the yen rose and the dollar extended declines following the release of the Federal Reserve meeting minutes last night. The aussie firmed up following a rally in base-metal prices. The rest of the day looks busy with several economic data publications across Europe and the US along with the release of the European Central Bank meeting minutes.

The dollar fell against the yen and other majors after the release of the minutes of the Fed’s July meeting, which showed a growing worry among the policymakers about the lack of strong inflationary pressures in recent data releases. This suggests that the central bank may hold off on raising interest rates this year. The Fed fund futures are now showing a smaller probability (below 50%) for a December rate hike. Looking at the latest trading in forex markets, dollar/yen was down at 109.83, euro/dollar inched down to 1.1761 and sterling was broadly flat at $1.2890.

While the recent geopolitical tensions between the US and North Korea have calmed down, the US is not having a break from a turbulent political scene, this time internal. Several high-profile CEO’s have resigned from President Trump’s council board following the fallout from his response to the weekend violence in Virginia.

The aussie and kiwi gained against the greenback, rising from their one-month lows. Aussie/dollar was trading at 0.7945 and kiwi/dollar was at 0.7321 ahead of the European session. The currencies down under advanced higher on the back of the dollar weakness and a recent rally in base-metal prices. Copper and aluminum prices spiked to their highest since 2014 while zinc hit a high not seen since 2007. The Australian jobs report out today showed a mixed picture. The country’s unemployment rate fell to 5.6% in July from the upwardly revised figure of 5.7% for the prior month. While there were more people employed in July, it was driven by part-time jobs as the amount of permanent jobs fell by more than 20,000. These figures augur poorly for wage growth and a pickup in inflation.

The euro inched lower against the greenback to last trade at $1.1761 ahead of the release of the minutes from the latest ECB meeting. At the same time, some reports have been suggesting that ECB President Mario Draghi will not use the meeting in Jackson Hole to announce any new monetary policy directions. Investors’ hopes had been lifted earlier as Mario Draghi had announced changes in the policy at the same place in 2014.
Sterling was broadly flat against the dollar, but the pair could move significantly following the release of UK monthly retail sales at 8:30 GMT.

Gold prices rose linked to the weakness in the greenback. The precious metal was last trading at $1,289.11 an ounce.

Oil prices inched higher during today’s first session of the day, following yesterday’s plunge. WTI was last trading at $46.84 a barrel and Brent was at $50.38. Oil prices tumbled late last night despite the Energy Information Administration report showing that US crude oil stocks fell by almost 13% from their peaks in March to 466.5 million barrels. Markets might be focusing on rising US production, which reached its highest level since mid-2015.