Capitol Hill and sentiment towards this week’s FED interest rate decision and outlook on rates will be key, with a quiet day on the data front giving the markets time to consider what lies ahead, with the BoE and Euro Summit also in focus.
Earlier in the Day:
Economic data released through the Asian session this morning was limited to Japan’s February trade data.
Japan’s exports increased by 1.8% in February, year-on-year, falling short of a forecasted 1.9% rise, following January’s 12.3% surge, while imports jumped by 16.5%, following January’s 7.9% increase, falling short of a forecasted 17.1% rise.
February’s ¥3bn trade surplus came in ahead of a forecasted ¥100bn deficit and January ¥944bn deficit.
The return to a trade surplus in February came in spite of the Chinese New Year that resulted in a 9.7% fall in exports to China. Exports to the U.S rose by 4.3%, which comes at a time when the U.S administration is reviewing trade terms that could lead to a trade war, while exports to the EU increased by 11.5%.
The Japanese Yen moved from ¥105.926 to ¥106.093 against the U.S Dollar upon release of the figures, before rising to ¥105.69 at the time of writing, a morning gain of 0.30%.
While the Yen was on the move, the Aussie Dollar slipped further back, down 0.27% to $0.7692 at the time of writing, with the Kiwi Dollar down 0.22% to $0.7202, a narrowing in yield differentials favouring the U.S Dollar, with the continued threat of a trade war also bearish for the pair.
On the political front, while equity the markets responded to further news of planned talks between North and South Korea and the U.S, falling support for Japan’s prime minister weighed on Nikkei through the session.
In the equity markets, the Nikkei was on the slide, down 0.73% ahead of the close, while the CSI300 and Hang Seng were up 0.29% and 0.19% at the time of writing. The ASX200 closed out the day with a 0.17% gain, with mining and resources stocks leading the way.
The Day Ahead:
For the EUR, economic data scheduled for release out of the Eurozone this morning is limited to January’s trade figures, which are forecasted to be EUR negative. The Eurozone’s trade surplus is forecasted to narrow from €25.4bn to €22.6bn, with concerns over possible trade tariffs on European car exports to the U.S an ongoing concern.
The EUR was down 0.18% to $1.2268 at the time of writing, as a shift in sentiment towards ECB monetary policy, following softer inflation figures and Draghi’s recent dovish comment, favoured the Dollar.
For the Pound, there are no material stats to consider through the day, while there is plenty for the markets to consider for the week ahead, including this week’s retail sales, inflation and employment figures and the BoE’s monetary policy decision.
While inflation and employment figures will be particularly important from the BoE’s perspective, progress on Brexit negotiations will also be pivotal in sentiment towards monetary policy and the Pound, as the UK government continues to disagree internally on Brexit. Friday’s Euro Summit will perhaps be of far greater significance for the Pound this week than Thursday’s monetary policy decision.
At the time of writing, the Pound was down 0.16% to $1.392, while up against the EUR.
Across the Pond, there are no material stats scheduled for release this afternoon to provide direction for the Dollar, as the markets shift focus to Wednesday’s interest rate decision and the release of the FOMC’s economic projections.
While a 0.25 percentage point rate hike has been priced in, how the FED views inflation and the rate path for the year ahead will be the key driver, though the markets will also need to consider noise from Capitol Hill, any further talk of trade tariffs considered to be a negative for the greenback.
At the time of writing, the Dollar Spot Index was up 0.08% to 90.302, recovering from an intraday low 90.169 at the start of the day.