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Forex: US Dollar May Rise on Pre-Positioning Before FOMC Minutes

Forex: US Dollar May Rise on Pre-Positioning Before FOMC Minutes

2014-02-18 11:54:00
Ilya Spivak, Head Strategist, APAC
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Talking Points:

  • New Zealand Dollar Underperforms After Comments from NZ FinMin English
  • Yen Sold on BOJ Rate Decision, Pound Down as Soft CPI Dents BOE Outlook
  • US Dollar May Rise as the Markets Ponder Upcoming FOMC Minutes Release

The New Zealand Dollar underperformed in overnight trade, sliding as much as 0.5 percent against its top counterparts. The selloff comments from New Zealand Finance Minister Bill English, who said he agreed with a widely-circulated research piece from Stephen Jen of SLJ Macro Partners – a hedge fund – that argued the Kiwi was highly overvalued. English rejected Jen’s assertion that the island nation’s structural problems mirror those of Ireland in 2007 that ultimately pushed that country into an EU assistance program amid the Eurozone debt crisis.

The Japanese Yen likewise faced selling pressure following the BOJ monetary policy announcement, where the central bank announced an extension of its lending facilities. The British Pound ticked lower after January’s UK CPI report showed the headline year-on-year inflation rate unexpectedly ticked down to 1.9 percent, the lowest since November 2009. Sterling tracked UK bond yields lower, hinting the outcome weighed on Bank of England policy expectations and pushed out investors’ perceived timeline for when the central bank would begin to raise interest rates.

Looking ahead, a quiet US economic calendar may open the door for investors to consider larger thematic forces ahead of tomorrow’s publication of minutes from January’s FOMC meeting. As we discussed in detail yesterday, the report may mark the beginning of a reversal for the US Dollar. The greenback has faced heavy selling pressure in recent weeks amid what appeared to be an unwinding of EM-driven risk aversion. The currency may find a lifeline however if a relatively hawkish tone from Fed officials reaffirms their commitment to the QE “tapering” process. Such rhetoric has scope to sink sentiment anew given a backdrop of recently disappointing US economic news-flow.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

0:30

AUD

RBA February Meeting Minutes

-

-

-

1:16

CNY

Foreign Direct Investment (YoY) (JAN)

16.1%

2.5%

3.3%

2:28

JPY

Bank of Japan Interest Rate Decision

-

-

-

2:28

JPY

BOJ 2014 Monetary Base Target

¥270T

¥270T

¥270T

6:00

JPY

Machine Tool Orders (YoY) (JAN F)

40.3%

-

39.6%

European Session

GMT

CCY

EVENT

ACT

EXP

PREV

9:00

EUR

Eurozone Current Account n.s.a. (€) (DEC)

33.2B

-

27.2B

9:00

EUR

Eurozone Current Account s.a. (€) (DEC)

21.3B

-

23.3B

9:30

GBP

CPI (MoM) (JAN)

-0.6%

-0.5%

0.4%

9:30

GBP

CPI (YoY) (JAN)

1.9%

2.0%

2.0%

9:30

GBP

Core CPI (YoY) (JAN)

1.6%

1.9%

1.7%

9:30

GBP

RPI (MoM) (JAN)

-0.3%

-0.4%

0.5%

9:30

GBP

RPI (YoY) (JAN)

2.8%

2.7%

2.7%

9:30

GBP

RPI ex Mort. Int. Payments (YoY) (JAN)

2.8%

2.7%

2.8%

9:30

GBP

PPI Input n.s.a. (MoM) (JAN)

-0.9%

-0.4%

0.2%

9:30

GBP

PPI Input n.s.a. (YoY) (JAN)

-3.1%

-2.9%

-1.0%

9:30

GBP

PPI Output n.s.a. (MoM) (JAN)

0.3%

0.0%

0.0%

9:30

GBP

PPI Output n.s.a. (YoY) (JAN)

1.2%

0.7%

1.0%

9:30

GBP

PPI Output Core n.s.a. (MoM) (JAN)

0.5%

0.1%

0.1%

9:30

GBP

PPI Output Core n.s.a. (YoY) (JAN)

0.9%

0.7%

1.0%

9:30

GBP

ONS House Prices (YoY) (DEC)

5.5%

6.0%

5.4%

10:00

EUR

German ZEW Survey (Curr. Situation) (FEB)

50.0

44.0

41.2

10:00

EUR

German ZEW Survey (Econ. Sentiment) (FEB)

55.7

61.5

61.7

10:00

EUR

Eurozone ZEW Survey (Econ. Sentiment) (FEB)

68.5

-

73.3

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.3634

1.3670

1.3689

1.3706

1.3725

1.3742

1.3778

GBP/USD

1.6490

1.6617

1.6666

1.6744

1.6793

1.6871

1.6998

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

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