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Pound, US Dollar May Fall on UK Wages Data and FOMC Minutes

Pound, US Dollar May Fall on UK Wages Data and FOMC Minutes

Talking Points:

  • British Pound may fall further if soft wages growth undercuts BOE policy bets
  • US Dollar may face selling pressure on minutes from January FOMC meeting
  • Aussie Dollar drops, Yen and Euro gain amid risk aversion in overnight trade

UK labor-market data headlines the economic calendar in European trading hours. Jobless claims are seen falling 3k in January, marking the third consecutive decline. Traders are likely to be far more interested in wage growth figures after a disappointing CPI report undermined BOE policy bets yesterday, sending the British Pound lower. Average weekly earnings are expected to grow at an annual pace of 1.9 percent, the lowest since February 2015. A soft print may push rate hike calls farther still into the future, compounding selling pressure on the UK unit.

Later in the day, the spotlight turns to the release of minutes from January’s FOMC meeting. Investors will be keen to gauge whether the document suggests that market volatility since the beginning of the year has undermined policymakers’ projected rate hike path. The policy statement and subsequent comments from Fed officials including Chair Yellen have taken a deliberative posture. A similarly vague tone this time around may give traders pining for dovish reassurance enough fodder to renew US Dollar selling and offer a lift to risky assets.

The sentiment-linked Australian Dollar underperformed while the anti-risk Euro and Japanese Yen traded higher in overnight trade as jitters returned across Asian stock exchanges. The MSCI Asia Pacific regional equities benchmark fell over 1 percent. The bulk of the move came after the Chinese Yuan was weakened by 0.16 percent – the most since January 7 – at today’s official fixing. Outsized USD/CNY devaluation has been a potent trigger for risk aversion since the beginning of the year.

Losing money trading in the FX market? This might be why.

Asia Session

GMTCCYEVENTACTEXPPREV
23:30AUDWestpac Leading Index (MoM) (JAN)0.0%--0.3%
23:50JPYMachine Orders (MoM) (DEC)4.2%4.4%-14.4%
23:50JPYMachine Orders (YoY) (DEC)-3.6%-2.8%1.2%
00:40USDFed's Rosengren Speaks at Colby College ---
06:00JPYMachine Tool Orders (YoY) (JAN F) -17.2%--17.2%

European Session

GMTCCYEVENTEXPPREVIMPACT
09:30GBPClaimant Count Rate (JAN)2.3%2.3%Low
09:30GBPJobless Claims Change (JAN)-3.0k-4.3kMedium
09:30GBPAverage Weekly Earnings (3M/YoY) (DEC)1.9%2.0%Medium
09:30GBPWeekly Earnings ex Bonus (3M/YoY) (DEC)1.8%1.9%Medium
09:30GBPILO Unemployment Rate 3Mths (DEC)5.0%5.1%Low
09:30GBPEmployment Change (3M/3M) (DEC)225k267kLow
10:00EUREurozone Construction Output (MoM) (DEC)-0.8%Low
10:00EUREurozone Construction Output (YoY) (DEC)-2.1%Low
10:00CHFCredit Suisse ZEW Survey Expectations (FEB)--3Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.10161.10851.11141.11541.11831.12231.1292
GBP/USD1.38881.41271.42171.43661.44561.46051.4844

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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