FX market outlook

FX market outlook

Posted on Thursday, March 23 2017 at 9:27 am GMT+0000

Dollar pauses slide against yen; focus on US House vote on healthcare.

The risk aversion in markets dissipated today and demand for safe havens eased. This helped the dollar made some recovery against the yen, while gold paused its six-day rally.

The dollar moved off four-month lows hit against the yen yesterday at 110.72 on investor concerns over US President Trump’s ability to push through his policies on growth and tax reforms. The greenback last trade around 111.20 yen in late Asian session trading but focus will remain on the currency today as the US House of Representatives votes later in the day to pass a bill to repeal and replace Obamacare, which was one of Trump’s key campaign promises.

Passing healthcare legislation will be Trump’s first test of his ability to deliver on his other major pledges on tax reform and infrastructure spending. If the bill passes it would be positive for the dollar but a rejection of it would dampen investor confidence in the greenback.

In other news today, the Reserve Bank of New Zealand held its policy meeting today and announced its decision to keep the benchmark interest rate at 1.75%. This was widely expected by the markets so the main focus was on the statement released by the RBNZ which said that policy will be accommodative for consider period. The kiwi dipped against the greenback to a session low of $0.7023 before steadying to pre-RBNZ levels around 0.7050.

Sterling edged higher in Asian trading today to test the key $1.2500 level after having weakened as much as 0.4% yesterday. The pound showed little reaction to the attack close to the British Parliament that left five people dead. Focus will be on UK retail sales data due later today.

Gold fell 0.2% to $1,246 an ounce, pausing a six-day advance that totaled 4.2%.

WTI oil rose to $48.40 a barrel after a big drop yesterday over concerns rising US crude stockpiles.

For the rest of the day, markets will focus on UK retail sales and US jobless claims data.