Kantox currency update: dollar picks up on US-China deal hopes
The US dollar posted moderate advances on Tuesday after the Chinese Foreign Minister announced that the trade talks with the US will be extended for a third day, which has boosted hopes of a trade deal between the world’s two major economies.
Commodity currencies like the Australian dollar or the Canadian dollar have posted sharp advances on the back the increase in oil prices and the brighter expectations about global trade, while the euro and the pound have remained within previous ranges.
EUR/USD: steady below 1.1500. The euro retreated on Tuesday from one-week highs at 1.1485, to hit lows at 1.1425, on the back of a string of weaker eurozone business confidence indexes, although the pair has managed to pare losses on Wednesday and return to the upper range of 1.1400. As at London market opening times, the EUR/USD is trading at 1.1465.
GBP/USD: rejected at 1.2800. Sterling’s recovery from last week’s “flash crash” to 1.2375 was capped on Tuesday at 1.2800 nine-day highs, before dropping to intra-day lows at 1.2708, with the market bracing for a turbulent week, as Theresa May struggles to get her Brexit plan approved by the UK Parliament. As at London market opening times, the GBP/USD is trading at 1.2745.
USD/JPY resistance at 109.00. The US dollar ticked up on Tuesday amid the apparent progress on the US-China trade talks, although the pair was unable to extend its recovery beyond 109.00. As at London market opening times, the USD/JPY is trading at 108.80.
In the Calendar Today
Today, the Bank of Canada will release its monetary policy decision. The bank is widely expected to keep rates unchanged at the current 1.75% but Governor Poloz and deputy Carolyn will hold a press release after the decision. Their comments about the economy and the bank’s policy might move the Canadian dollar.
Later on, in the UK, we will be attentive to BoE Governor Carney’s speech. With the investors increasingly wary about the prospects of a hard Brexit, Carney’s views on the economic perspectives will be observed with interest and might have some impact on the pound.
In the US, the focus will be on the release of the minutes of December’s Fed meeting. The bank raised rates last month after having sent the message that interest rates are approaching neutral levels, which suggests that the bank will slow down its monetary tightening cycle this year. In this context, any new insight into the bank’s plans might have a significant impact on USD volatility.
15:00 GMT BoC: Monetary policy decision
Previous: 1.75% Expected: 1.75%
15:30 GMT BoE: Carney’s speech
19:00 GMT FOMC Minutes