Talking Points:

- With little meaningful data out overnight and few developments along key plot lines, FX markets rather quiet on the last trading day of the week.

- Flurry of activity around central banks between Wednesday and Thursday has exhausted near-term meaningful drivers; news, not data, will drive price today; reminder, it's a quadruple witching day in US equity markets..

- The crowd has increased their net-short EUR/USD and net-long USD/JPY positions, which means a US Dolllar low may not have been found yet.

With the final trading day of the week under way, FX markets look exhausted. Exhausted in the sense that all of the fuel driving price action has been used up, and that a lack of meaningful catalysts, particularly on the economic calendar, leave traders patiently sitting on their hands, waiting for something new to act on. True, there is a 'high' rated US economic data series today (the preliminary March U. of Mich Confidence report), but it's a sentiment survey meaning it's what we consider 'soft data,' nothing substantial enough to move the needle on the Fed's rate hike timeline (we need 'hard data' like CPI, retail sales, NFPs, GDP, etc for that).

At the moment, the 'juice has been squeezed' out of the fruit that is 'speculation around the Fed's rate hike timeline,' at least as a bullish catalyst for the US Dollar. As was made emminently clear by Fed policy officials this week, the most significant driver of price action in US financial markets and assets over the past four months - the hope of a wave of fiscal stimulus from the Trump administration - has not yet been factored into their Summary of Economic Projections (SEP). If the Fed is to tighten rates quicker than currently priced in, it will only come once there's concrete evidence of fiscal stimulus starting to look realistic.

From this angle, then, the uncoordinated rollout of the Affordable Care Act replacement (ACA or Obamacare), the American Health Care Act (AHCA), is a poor litmus test for future policy endeavors. The logical assumption is, "given the disdain by Republicans over the last 8 years towards the ACA, this should have been a straightforward legislative process now that the GOP controls the House, the Senate, and the White House, and thus, why would markets be correct in thinking that more ideologically challenging legislation like a $1 trillion infrastructure spending bill pass with much ease (if at all)?"

Elsewhere, the other major market theme to pay attention to will remain the French election. It seems that there is still a fair degree of political risk premium priced into the Euro (which, when it evaporates, will be bullish for the single currency). According to Oddschecker, an aggregator of betting odds in Europe, the probability of an Emmanuel Macron victory after the two rounds of voting (April 23 and May 7) have increased from 55.9% at the end of last week to 61.2% today; the odds of a Le Pen victory have fallen to 28.2%. The latest polls released show Macron and Le Pen running neck-and-neck in the first round of voting, but with Macron on pace to trounce Le Pen by around 20-pts in the second round (and clearing the 50% threshold to win the French presidency).

Finally, market participants are eagerly awaiting UK Prime Minister Theresa May to trigger Article 50, but were provided a false start early this week when several news agencies reported that it could come as early as Tuesday (it didn't). Instead, with the 60th anniversary of the Treaty of Rome coming up on March 25, it seems that UK PM May will wait until afterwards in order to not spoil the party. Given public comments by the three Brexiteers heading up negotiations with the EU - David Davis, Liam Fox, and Boris Johnson - a 'hard Brexit' seems to be the path that the UK will be heading down once UK PM May pulls the trigger.

Read more: Fed’s Dovish Hike Sinks USD; Dutch Elections Lift Euro

--- Written by Christopher Vecchio, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

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