14.03.2017 Daily Market Analysis

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It was a quiet start to an action-packed week on Monday, with the US dollar (USD) posting a mixed performance against the other major currencies.

The US Federal Reserve is expected to hike rates for the first time this year, but with the Fed Fund Futures pricing a 100% chance of tightening, investors will be cautious and focus will shift to the full year dot plot. This month’s rate hike should be the first of three rate hikes this year, but the market is currently only pricing in two rate hikes. If the policymakers come out aggressively again and support the three rate hikes dot plot, there will be renewed interest in the greenback. On the other hand, a vague statement will curtail any meaningful USD gains. Today though, traders will watch out for the release of the month on month Producer Prices Index.

Meanwhile, the euro (EUR) edged lower against the USD, after the much-awaited ECB President Draghi’s speech gave little in terms of market moving comments. Draghi crossed the wires from Frankfurt, but his speech was mainly focused on the need for productivity growth within the Eurozone. Today, euro traders will watch out for the release of the German ZEW Economic Sentiment as well as the month on month Eurozone Industrial Production numbers.

In other currency news, the British pound (GBP) was one of the best performers yesterday as it printed its highest single day gains against the USD in over 10 trading days. The House of Lords voted to overturn the amendments of the Brexit bill on Monday, while it was suggested that Prime Minister Theresa May will not trigger Article 50 this week. The latest proceeding threatens to keep sending the Brexit bill back and forth between the two parliament houses, but once an agreement is reached, it will become law and pave the way for triggering Article 50. There is no major UK macroeconomic data set to be released today, with Brexit headlines expected to continue providing the cue for the Queen’s currency.  

Commodity currencies posted a mixed performance yesterday, with the Australian dollar (AUD) edging higher against the USD while the New Zealand dollar (NZD) drifted lower. The Canadian dollar (CAD), on the other hand, ended the day unchanged. The AUD was supported by upbeat Chinese data as year on year Industrial Production printed 6.3%, better than the expected 6.2%, while year to date Fixed Asset Investment printed 8.9%, higher than the expected 8.2%. There were no major data releases from Canada and New Zealand, but today, NZD traders will watch out for the release of Current Account data.