Summary:

• US dollar retains its gains made during Powell’s testimony
• May’s survives another voting
• Asian equities take a breath amid a calm session
• Crude oil moves lower in the aftermath of an unexpected build reported by API

The US dollar is dividing and conquering this morning gaining ground against its all major peers in the G10 basket. These gains already occurred just prior to the Powell’s address to the Senate who reiterated his view that further gradual monetary tightening seems to be appropriate.

Looking elsewhere, one needs to mention the British pound which first jerked higher in response to the strong labour market, but then fell when Brexit-related concerned swirled again. There were conjectures that PM Theresa May would have some difficulties in voting for her Brexit plan, however, she survived once again as a customs bill amendment was passed the House of Commons yesterday evening (the voting was 318 to 285 in favour). After being accepted by the House of Commons now the bill is heading to the House of Lords where further challenges to the legislation are anticipated. Notice that this bill sets up arrangements for customs and cross-border taxation once Brexit is trigger (29 March 2019). Even as this seems to be GBP positive news the pound remains depressed this morning predominantly due to widespread strength of the greenback. Bear in mind that the inflation release is out this morning, hence the pound should stay in the spotlight.

The US dollar index (USDIDX on xStation5) is heading north and eyeing a 95.00 handle which has yet to surrender as of yet. Once this line is breached a possible extended pullback could go toward 96. Source: xStation5

When it comes to equity markets one may notice that riskier assets in Asia have been able to erase part of their recent losses despite quite a hawkish stance voiced by Powell. On the other hand, do not forget that the current pace of interest rate rises has been already pencilled in, hence there is no too much free space to see the US dollar rising solely on this story. Anyway, Wall Street ended the day a bit higher helping Asian stocks. Among them the Japanese NIKKEI (JAP225) is adding 0.6% being the best performer this morning. It’s worth noting that the EU and Japan agreed on Tuesday a free trade agreement. It needs to be said that this is a big deal during of never-ending protectionist moves undertaken by the US and China. Japan vowed to scrap tariffs on 94% of all imports from the EU in exchange for removing tariffs on 99% of imports from Japan by the European Union.

The Japanese NIKKEI has been rising over the recent days, but the major resistance lies ahead. In order to purse the bullish move this supply area needs to be dealt with. Source: xStation5

Finally, let’s notice that oil prices are falling this morning (WTI is down 0.75%, and Brent falls 0.55% as of 6:50 am BST) chiefly on the back of an unexpected build in US crude stockpiles reported by the API yesterday evening. The release showed that stocks rose 0.63 million barrels, gasoline inventories increased 0.425 million barrels, whereas distillates stocks climbed 1.7 million barrels. Of course, the data needs to be confirmed by the DoE, a release is scheduled for this afternoon (read more in our daily calendar post).