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Dollar Looks to Fed Minutes for Direction, Pound Eyes BOE Vote

Dollar Looks to Fed Minutes for Direction, Pound Eyes BOE Vote

Ilya Spivak, Head Strategist, APAC

The Euro may fall if Germany’s ZEW investor confidence gauge disappoints expectations. The Yen rose after the BOJ released minutes from January’s meeting.

Talking Points

  • FOMC Minutes May Boost US Dollar on Signs of Early Stimulus Unwind
  • British Pound to Fall if BOE Minutes Hint at Near-Term QE Expansion
  • NZ Dollar Sinks as Wheeler Says RBNZ “Ready to Intervene” if Needed

The spotlight turns the Federal Reserve as it publishes minutes from January’s FOMC meeting. Traders will be most interested in the tone of discussion surrounding the possible tapering of the size of asset purchases – an approach that has emerged in several Fed officials’ comments over recent weeks – and the possibilities for the timing of such an outcome.

Bond markets suggest investors are pricing in inflation at an average of 2.35 percent over the Fed’s target one- to two-year time horizon, up from 1.47 percent at the beginning of the year. That puts a move above 2.5 percent – the FOMC’s threshold for maintaining the current accommodative posture – well within reach over the coming months. This means Ben Bernanke and company may be pressured to reduce stimulus far earlier than previously expected, boosting the US Dollar.

Minutes from February’s Bank of England policy meeting headline the economic calendar in European hours. Although much of the central bank’s overall position will have been well-telegraphed already by last week’s quarterly inflation report, the vote count for and against additional QE will be interesting. This will help investors gauge the likelihood of additional stimulus in the near term, pre-dating the BOE’s takeover by Governor-designate Mark Carney in the summer. Needless to say, any such cues are likely to further punish the British Pound. We continue to hold short GBPUSD.

The New Zealand Dollar sank overnight after RBNZ Governor Graeme Wheeler said the currency was overvalued and warned the central bank stood ready to intervene into the FX market if needed. Wheeler cautioned that there are no “simple solutions” to the Kiwi’s appreciation however, adding the RBNZ can influence the currency’s peaks but not set a specific level. Still, he warned policymakers were looking into “macro-prudential” policies, with more details to emerge next month (although quantitative easing was singled out as “not justified”).

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Producer Prices - Outputs (QoQ) (4Q)

-0.1%

-

-0.9%

21:45

NZD

Producer Prices - Inputs (QoQ) (4Q)

-0.3%

-

-1.0%

23:00

AUD

Conference Board Leading Index (DEC)

-0.1%

-

-0.2%

23:30

AUD

Westpac Leading Index (MoM) (DEC)

0.2%

-

0.7% (R+)

23:50

JPY

Merch Trade Balance Total (¥) (JAN)

-1629.4B

-1379.6B

-643.3B (R-)

23:50

JPY

Adj Merch Trade Balance (¥) ) (JAN)

-678.9B

-586.7B

-783.8B (R+)

23:50

JPY

Merchandise Trade Imports (YoY) (JAN)

7.3%

2.1%

1.9%

23:50

JPY

Merchandise Trade Exports (YoY) (JAN)

6.4%

5.6%

-5.8%

0:00

AUD

DEWR Internet Skilled Vacancies (MoM) (JAN)

-0.7%

-

-1.9% (R+)

0:30

AUD

Wage Cost Index (QoQ) (4Q)

0.8%

0.8%

0.7%

0:30

AUD

Wage Cost Index (YoY) (4Q)

3.4%

3.4%

3.7%

2:00

CNY

Actual FDI (YoY) (JAN)

-7.3%

-4.2%

-4.5%

4:30

JPY

All Industry Activity Index (MoM) (DEC)

1.8%

1.7%

-0.4% (R-)

7:00

JPY

Convenience Store Sales (YoY) (JAN)

-0.9%

-

-2.0%

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:00

EUR

German Producer Prices (MoM) (JAN)

0.8% (A)

-0.3%

Medium

7:00

EUR

German Producer Prices (YoY) (JAN)

1.7% (A)

1.5%

Medium

7:00

EUR

German Consumer Price Index (MoM) (JAN F)

-0.5% (A)

-0.5%

Medium

7:00

EUR

German Consumer Price Index (YoY) (JAN F)

1.7% (A)

1.7%

Medium

7:00

EUR

German CPI - EU Harmonised (MoM) (JAN F)

-0.7% (A)

-0.7%

Low

7:00

EUR

German CPI - EU Harmonised (YoY) (JAN F)

1.9% (A)

1.9%

Low

9:30

GBP

Bank of England Releases Feb MPC Minutes

-

-

High

9:30

GBP

Jobless Claims Change (JAN)

-5.5K

-12.1K

High

9:30

GBP

Claimant Count Rate (JAN)

4.8%

4.8%

Medium

9:30

GBP

Employment Change (3M/3M) (DEC)

117K

90K

Medium

9:30

GBP

Average Weekly Earnings (3M/YoY) (DEC)

1.4%

1.5%

Low

9:30

GBP

Weekly Earnings ex Bonus (3M/YoY) (DEC)

1.3%

1.4%

Low

9:30

GBP

ILO Unemployment Rate (3M) (DEC)

7.7%

7.7%

Medium

10:00

CHF

ZEW Survey (Expectations) (FEB)

-

-6.9

Low

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.3346

1.3438

GBPUSD

1.5270

1.5481

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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