Dollar gains on hawkish Fed speech

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Today’s Economic events

  • Switzerland ZEW economic expectations .5 vs. -5.9 previously
  • German Bundesbank President Weidmann speech
  • FOMC Member Bullard Speech

Coming Up

  • SNB Quarterly Bulletin
  • US New home sales
  • Weekly Crude Oil inventories
  • New Zealand trade balance

Economic data was fairly limited today leaving the markets to technical trading. In Asia, stocks were mixed with the Nikkei225 closing down -0.28% while the Shanghai composite gained 0.38%. The modest risk aversion sentiment in the aftermath of the Brussels terror attacks faded as the US Dollar managed to post steady gains while the Yen and Gold safe haven retreated. The US Dollar was also supported by Fed member; Charles Evans comments that the US economy was strong and that further rate hikes were needed. He was optimistic that the Fed would reach its inflation target that was mandated. USDJPY has continued its uptrend after yesterday’s brief intraday dip to 111.5 posting gains of 0.37% at the time of writing. USDJPY is currently trading close to a 4-day high at 112.81.

[Tweet “Charles Evans: the US economy is strong and further rate hikes are needed”]

The commodity risk currencies remained weak with the Australian dollar giving back most of its gains. Prices failed to break above last week’s highs near 0.766 as the AUDUSD posted an intraday high to 0.764 before giving back the gains and trading below Monday’s lows of 0.756 and down -0.75% at the time of writing. The NZDUSD is also down -0.76% at the time of writing, with the Kiwi continuing to post steady declines since last week.

In Europe, the single currency is looking at another day of declines with EURUSD currently down -0.41%, breaking below yesterday’s low of 1.1188. Germany released new forecasts where GDP and inflation projections were revised lower for the remainder of 2016.

GBPUSD continues to feel the heat as the Cable is down -0.48% at the time of writing, trading at $1.4145, posting a 4-day low. The British Pound remained broadly weaker across the board as Brexit continues to stay on the forefront. Yesterday’s terror attacks in Brussels is being seen as strengthening the ‘Leave’ campaign where immigration and border controls form the core of their campaign. European equity markets managed to recover from yesterday with the German DAX rising 0.8% and the London FTSE100 gaining 0.09% at the time of writing.

The NY trading session opened on a quiet note with US new home sales data awaited. Expectations are for a month over month increase of 3.20% in February, following January’s decline of -9.20%. New Zealand trade balance numbers are due later in the evening.

US equity futures are pointing to a weaker open today with the Dow Jones Industrials and the S&P500 futures down -0.09% and -0.07% respectively.

On the commodity front, Gold price retreated off the $1250 handle yesterday and is down -2.13% at the time of writing, trading at $1220 an ounce against a stronger US Dollar. WTI Crude Oil prices are also lower, down -1.33% at the time of writing, trading at $40.70 a barrel ahead of the weekly Crude Oil inventory reports where expectations are for a weekly build up of 2.5 million.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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