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Forex Market: USD Steady after Fed Minutes, Focus Shifts to Trade Issues

On Thursday, the dollar inched up following the release of minutes from Fed Reserve’s last meeting. The meeting revived expectations for a possible U.S rate hike this year while investors shifted their focus back to trade issues for fresh directional cues.

From the Minutes, the U.S Economy and its labor market remained strong, prompting some expectations of at least one more interest rate hike this year. The Fed caught markets off guard after it took a dovish turn in its widely read sign that it would suspend interest rate hikes.

“The dollar drew some lift as the minutes appeared to have appeased market participants who were clinging to views that the Fed would hike rates one more time this year – but all in all, the minutes were in line with what the Fed said in January,” said Daisuke Karakama, chief market economist at Mizuho Bank.

“The market’s focal point will now shift back to trade. The U.S.-could extend the China trade negotiation deadline, and that may mean Europe and Japan could face trade issues.”

On Wednesday, Trump said the U.S would impose tariffs on European car imports if it cannot reach a trade deal with the European Union.

The dollar was a shade weaker at 110.75 yen after rising 0.25% overnight.

On Wednesday, the Euro change a little at $1.1337 after nudging off a two-week high of $1.1371 scaled earlier.

The pound dipped 0.15 percent to $1.3031 pulling back further from a near three-week high of $1.3109 touched the previous day.

Sterling took a knock after three lawmakers defected from British Prime Minister Theresa May’s ruling Conservative party in a move that could undermine her Brexit strategy.

On Wednesday, the pound weighed down after Fitch Ratings said it might downgrade the United Kingdom’s “AA” debt rating based on growing Brexit uncertainty.

Forex Market: Euro holds below two-week high before survey data; Aussie falls

On Thursday, the Euro, held below a two- week high as investors waited for survey data to get a clearer idea on the outlook for the Eurozone economy. Meanwhile, the AUD fell after a Chinese port banned imports of the country’s coal.

Germany and France report February Purchasing Managers Index (PMI) data shortly, followed by the Eurozone flash PMI data at 0900 GMT.

Since January, a bunch of weak data has undermined support for the single currency prompted investors to revise down their inflation expectations in the coming months and pulled core bond yields lower.

“The economic situation in the eurozone seems much more critical (to the euro) at present,” Commerzbank strategists wrote in a daily note. “Against this background, today’s PMI is likely to be of particular interest.”

On Thursday, the single currency was a shade lower at $1.1335 after hitting a two-week high of $1.1371 on Wednesday. It has fallen more than 2% from a 2019 high of near $1.16.

Elsewhere, the Aussie tumbled after customs officials at China’s northern Dalian port banned imports of coal from major supplier Australia. The ban came days after the central bank withdrew from its long-standing tightening policy bias.

The indefinite ban effective since February comes as major ports in China prolong clearing period for Australian coal to at least 40 days.

The Aussie fell 1% to $0.7086 in a volatile Asian trading session before retracing some losses to stand 0.7% down on the day.

Broadly, the dollar index, which measures the U.S. unit against a basket of six major currencies, added 0.11% to 96.559 after minutes from the Fed Reserve’s last meeting revived expectations for a U.S. rate hike this year.

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