Talking Points:

  • Aussie, NZ Dollars back on the offensive amid swelling rate hike hopes
  • Thin European docket, MLK holiday leave financial markets rudderless
  • German coalition and US budget talks, Brexit diplomacy may bring jolt

The Australian and New Zealand Dollars returned to the offensive having lost ground on Friday. The currencies rose alongside local bond yields, hinting at swelling regional rate hike speculation as the driver behind the advance. The Yen also gained ground as Japanese shares turned lower after gapping up at the weekly trading open, offering a boost to the perennially anti-risk currency.

The European economic data docket is relatively quiet while the US calendar has been emptied as markets remain closed in observance of the Martin Luther King Jr Day holiday. That is likely to sap liquidity and might make for a quiet, consolidative day. Still, thin trading conditions may amplify sensitivity to stray headline risk and translate into kneejerk volatility, so traders would be wise to proceed with caution.

Such a jolt can come from a variety of places. In Germany, apparent signs of progress in coalition talks bolstered the Euro but a final deal remain absent. Meanwhile, Congressional lawmakers are scrambling to put together another stopgap funding bill to avoid a US government shutdown on January 19. Finally, Spanish and Dutch officials are reportedly back-channeling to keep EU/UK links close post-Brexit.

Where are the major currencies heading in the first quarter of 2018? See our forecasts here!

Asia Session

Australian, New Zealand Dollars Buoyed by Rate Hike Speculation

European Session

Australian, New Zealand Dollars Buoyed by Rate Hike Speculation

** All times listed in GMT. See the full DailyFX economic calendar here.

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

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