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Webinar: Market Mood Sours as Key Event Risk Looms Ahead

Webinar: Market Mood Sours as Key Event Risk Looms Ahead

2017-01-30 11:19:00
Ilya Spivak, Head Strategist, APAC
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Talking Points:

  • US Dollar may fail to capitalize on upbeat data, FOMC
  • British Pound may fall on "Super Thursday" outcome
  • Yen at the mercy of risk trends as BOJ holds status quo

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The US Dollar faces a seemingly rosy economic data backdrop, with key releases on tap this week set to show the Fed's favored inflation gauge ticked up while the manufacturing sector perked up and payrolls growth accelerated. Against this backdrop, the Fed seems likely to maintain a cautiously hawkish posture when the FOMC delivers the first rate decision of 2017. The greenback may fail to capitalize however as lingering US fiscal policy uncertainty encourages traders to scale back exposure.

The British Pound may face selling pressure if the Bank of England opts to maintain a dovish bias despite recently upbeat growth and inflation readings, citing lingering Brexit worries. The central bank will publish its quarterly inflation report and Governor Mark Carney will hold a press a conference to discuss it at the same time as the minutes and outcome of the latest policy meeting are unveiled.

The Bank of Japan is likely to keep its policy stance unchanged this week, with Governor Haruhiko Kuroda and company opting for wait-and-see mode until the path of US fiscal policy and its knock-on effects on monetary tightening are better defined. Sharp swings in global bond yields since last year's surprise election of Donald Trump as the 45th President of the US have complicated the BOJ's recent pivot to targeting the 10-year JGB yield. This is likely to leave the Japanese Yen at the mercy of risk sentiment trends.

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

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