Summary:
- USD remains the weakest currency among G10 as Fed’s Yellen warned against quicker rate hikes and investors await FOMC minutes
- European indices hold gains, German DAX (DE33 on xStation5) catches up after reports on possible resumption of coalition talks
- Oil prices touch this year highs, DoE report on the agenda later today
As far as currency market is concerned, one has to admit that the volatility was subdued this morning. The top performer was JPY despite upbeat sentiment on equity markets. Moreover, USD was traded broadly lower as investors interpreted comments from Fed’s Yellen as dovish and FOMC minutes are out in the evening. It’s worth mentioning that German FDP still considers resuming coalition talks with Chancellor Merkel. This report helped DAX to catch up other stock indices.
One of the most interesting events overnight was Janet Yellen’s speech. She said that tightening too quickly could risk stranding inflation below Fed’s 2% target. Moreover, Yellen stressed out that there has been “some hint” that expectations for future price increases may be drifting down. On the other hand, she underscored that weakness in inflation should be temporary. Thus, a rate-hike in December is almost a done deal – we get minutes from the latest Fed meeting today which could confirm this move and give us a hint about rate path for 2018. The US dollar is now the weakest currency among G10 and JPY is a top performer despite upbeat sentiment on equity markets. Reuters reported that there are early signs form BoJ of reducing policy accommodation. However, it is still rather unlikely to see changes in the bank’s policy in foreseeable future.
Dash has drawn the most attention thus far this week as it’s surged much above $550 recently. It’s worth underlining that the price has more than doubled its value this month climbing from around $250 to the peak registered a touch below $570 on Wednesday. The main reason could be a plan aimed at solving an internal crisis taking place in Zimbabwe.
The Scandinavian currencies made substantial declines over the course of the last seven days partially on the back of the stronger single currencies, however, there were important domestic factors standing behind this sell-off as well. Both Norway and Sweden conducted expansionary monetary policy in the past months and therefore there are more and more assumptions that real estate bubbles could have emerged in the aftermath.
Wednesday is full of macroeconomic releases where the US dollar and oil prices might be the most volatile assets. There is no doubt that the FOMC minutes are the most awaited event today, however needless to say that retail sales from the NZ economy could have an equally important impact on the NZD. On top of that, oil traders will await impatiently a weekly report of the US DoE which seems to especially of note given what the API showed yesterday.