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TALKING POINTS – ECB, FOMC, YEN, US DOLLAR, EU SUMMIT, BREXIT, UK GDP, US CPI

  • Yen, US Dollar may rise as grim ECB and FOMC sour market mood
  • UK GDP and US CPI statistics might pressure risk sentiment further
  • EU leaders’ summit to take up UK request for delaying Brexit date

Choppy price action prevailed across most of the G10 FX space in Asia Pacific trading hours as the markets braced for the week’s most-anticipated event risk: the ECB rate decision and the publication of minutes from last month’s FOMC meeting.

The Eurozone monetary authority surprised on the dovish side last month, delaying a rate hike at least through 2019 and introducing a fresh round of TLTRO bank liquidity injections. Fed officials were also decidedly downbeat, backing off from further rate hikes until 2020 and dialing back the pace of QT.

This points to a downbeat tone in incoming rhetoric. That may build on global slowdown fears revived by a grim IMF outlook update yesterday. If this triggers de-risking across financial markets, the anti-risk Yen and US Dollar may benefit while commodity bloc currencies bear the brunt of selling pressure.

UK GDP, US CPI DATA MAY COMPOUND RISK-OFF DYNAMICS

UK GDP and US CPI are also due. The former is expected to show growth stalled in February while the latter puts core inflation at 2.1 percent in March, unchanged from the prior month. The former may amplify risk-off dynamics. The latter is a worry too in that it may hint at limited scope for Fed easing.

EU LEADERS TO DEBATE BREXIT EXTENSION

Finally, an emergency EU leaders’ summit will take up the question of delaying Brexit per the UK government’s request. They may opt for a longer-term delay than the June 30 deadline proposed by Prime Minister May and approved by Parliament, triggering uproar in Westminster.

What are we trading? See the DailyFX team’s top trade ideas for 2019 and find out!

CHART OF THE DAY – S&P 500 TECHNICAL SETUP WARNS OF DOWNTURN AHEAD

Yen, US Dollar May Rise as Grim ECB, FOMC Sour Market Mood

The bellwether S&P 500 stock index is tracing out a bearish Rising Wedge chart pattern. Negative RSI divergence bolsters the case for ebbing upside momentum while the appearance of an Evening Star candlestick pattern warns that topping might be imminent. The setup speaks to what may be a broad-based risk-off shift in market-wide sentiment trends just around the corner.

FX TRADING RESOURCES

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

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter