23.02.2017 Daily Market Analysis

forex

A hawkish FOMC (Federal Open Market Committee) stance failed to give the US dollar (USD) the much-needed bullish spark, as the greenback posted an overall weak performance on Wednesday.

The FOMC minutes showed that policymakers saw the need for a rate hike ‘fairly soon’ if the economy continues its good trajectory. The policymakers also saw a high risk of unemployment overshooting, but overall the tone was positive. Investors also heard FOMC voting member Powell, who said that three rate hikes in 2017 is highly plausible. Today, the US will release unemployment claims, with investors hoping that the greenback will finally follow the fundamental blueprint and print gains, as the prospects of a rate hike as early as next month becomes a distinct possibility.

Political undertones continue to provide the cue for the euro (EUR), which yesterday turned sharply higher. Investors were encouraged by Francois Bayou, who pulled out of the French Presidential race. This effectively increased the chances of Emmanuel Macron beating Marine Le Pen. Analysts are expecting a Macron-Bayou alliance, which will have a realistic chance of edging past Le Pen. Today, euro traders will watch out for the release of German GDP data and Italian Retail sales numbers, but politics will still be the major price action influencer.

On the other hand, the British pound (GBP) drifted lower on mixed data. The quarter on quarter second GDP estimate printed 0.7%, better than the expected 0.6%, but Preliminary quarter on quarter Business Investment came in at -1.0%, worse than the expected 0.0%. There is no major market moving data from the UK today, with the Queen’s currency expected to take its cue from the other majors.

Commodity currencies posted a mixed performance, with both the Australian dollar (AUD) and New Zealand dollar (NZD) printing gains, but the Canadian dollar (CAD) tumbled against the greenback. The AUD is enjoying positive sentiment after recent upbeat comments from the Reserve Bank of Australia (RBA). Today, AUD watchers will also be keen on RBA Governor Lowe comments when he will be crossing the wires from Sydney as he testifies before the House of Representatives Standing Committee on Economics. Year on year credit card spending in New Zealand rose 0.2% to print 7.1%, supporting the NZD. The CAD was weighed down by weak data as month on month Core Retail Sales printed -0.3%. Oil prices also rolled back gains made on Tuesday and compounded problems for the loonie. CAD traders will today watch out for any crude oil supply concerns as the US releases its latest Crude Oil Inventories. Aside from that, there will be no major market moving data from the commodity countries, with their respective currencies expected to be driven by market sentiment.