FX market outlook

FX market outlook

Posted on Wednesday, July 19 2017 at 8:28 am GMT+0000
Markets calm ahead of ECB, BoJ meetings; oil pressured on US inventories

It has been a quiet overnight session ahead of what could be a stormy Thursday with the European Central Bank and the Bank of Japan holding their policy meetings. Most majors traded in a narrow range, while oil prices recorded the biggest move of the day.

The Australian and New Zealand dollars continued gaining against their US counterpart during the Asian session. Aussie/dollar was up to last trade at 0.7932, supported by comments perceived to be hawkish from the Reserve Bank of Australia’s policy meeting minutes and higher commodity prices.

The greenback was steady against the yen ahead of the Asian markets close, having traded in a relatively narrow range of 111.87-112.23. The US currency has been impacted negatively from both political and economic developments. The latest news on the failure to repeal and replace Obamacare, after two more Republican Senators opposed the latest bill proposal, sent the dollar tumbling against all major currencies. The news came after Friday’s disappointing inflation and retail sales figures. The markets are skeptical about future interest rate hikes considering the lack of inflation pressures and fear of the Trump administration failing to pass any legislation which could spur growth. The yield on 10-year US Treasuries is up one basis point to 2.27%, though down seven basis points this week after dropping five basis points last week.

The euro has been pressured during Asian trading as some profit taking might have taken place ahead of the ECB policy meeting tomorrow. It will be ECB President Mario Draghi’s first public appearance following his relatively hawkish comments in Sintra, Portugal, which sent the euro to new highs against the dollar. News broke out overnight about the ECB examining its options concerning its stimulus package, in order to make a decision in the autumn. Traders will be closely monitoring the meeting tomorrowas it could significantly move the euro against its peers. Euro/dollar was last trading at 1.1534.

Sterling was flat against the US dollar during the Asian session. Pound/dollar was last trading at 1.3037.

Crude oil prices were the biggest movers during session, with both WTI and Brent falling about half-a-percent. Oil prices pulled back, as investors awaited fresh data on US crude inventories, which are seen to have increased last week. WTI was last trading at $46.15 a barrel while Brent was at $48.61.

Gold has been under slight pressure today, following a strong rally for three days. The precious metal was last trading at $1,240.00 an ounce.

While the Asian session was quiet due to a lack of economic releases, the US session could get busier amid the release of building permits issued in June as well as housing starts. Oil traders will likely be busy with the release of US crude oil inventories in the early US session.