Federal Reserve Chairman Powell signals patience on policy
Wednesday 27 February, 2019
Daily Currency UpdateThe Greenback fell to a three-week low on Tuesday against a basket of currencies as Federal Reserve Chairman Jerome Powell repeated that the US central bank would remain patient on monetary policy, suggesting that it was unlikely to raise interest rates anytime soon. Powell continues to testify today, but may be overshadowed by Michael Cohen, President Trump's former lawyer who give public testimony today.
Today the US released Pending Home Sales which month over month pushed well above previous of -2.3% posting 4.6% while expectations were for 0.4%. From a technical perspective, the Greenback is slightly weaker against most of its trading peers today, except for the British Pound which is the best performing currency this year and gaining over 0.48% since yesterday.
Key MoversThe Canadian dollar is lower this morning against the euro and the pound, but when valued against the Greenback it is up 0.75 % gaining 100 pips since yesterday’s open. Crude oil prices added to the late move in the loonie as OPEC talking heads say they are more concerned with "market stability first and foremost” then by pressure from US President Donald Trump's comment to maintain supply.
On the release front today in Canada we had quarterly Consumer Price Index (CPI) which was expected to see the annual figure come down to 1.4% from 2.0% in December, CPI data came in at the consensus.
From a technical perspective, the Canadian dollar this morning is trading at 1.3134. We now see support at 1.3114 to hold on moves holding below 1.3157; any upward push will likely meet resistance around 1.3201.
The Euro further advanced against the United States Dollar yesterday to hit a one-week high of 1.1380. Further gains can be attributed to developments in Brexit, as UK PM Theresa May has advised that a vote would be done to extend the Brexit leave date of March 29th to no later than June 30th. This would avoid having the UK participate in European parliamentary elections. German Consumer Climate also came back on target with its forecast yesterday, at 10.8.
Two data releases expected to have an impact on the EUR will be out this evening. These will show the change in private loans issued to consumers and the average yield on Italian 10-year bonds sold at auction. Deutsche Bundesbank President Weidmann will also hold a press conference about their annual report, and his public engagement is often used to drop subtle clues regarding future monetary policy.
The Great British Pound surged to fresh highs through trade on Tuesday after Theresa May announced she would offer lawmakers the chance to vote on extending Article 50. Which would delay Britain’s exit from the EU, this caused the Sterling to surge in the wake of the announcement as the chances of the UK crashing out of the European bloc without an exit agreement in place were dramatically reduced. Jumping 1.4% the pound touched five-month highs against the USD while surging to 21-month highs against the Euro, enjoying its largest daily gain against the common currency in almost two years.
The vote to extend Brexit negotiations has been scheduled for March 14th; an emergency backstop should parliament reject May’s current Brexit deal on March 12th. Having moved through 1.3250 headline news will continue to drive direction as the door has been opened for an extension toward a collection of strategically placed options at 1.34 and 1.35.
Attentions remain squarely affixed to Brexit developments with headline news and willingness for British lawmakers to accept the current deal driving short term direction.
Tuesday saw the Aussie rise for the second consecutive day against the greenback. The European session saw AUD/USD gradually ascend to 0.7150 before racing to 0.7190 towards the back end of the North American session as the USD was sold off. AUD/NZD also rose from 1.0390 to 1.0536 on the day.
Today we have the Q4 construction work report due out at 11:30 am Sydney time. The report, which is expected to show a 0.4% rise after a weaker than expected read in Q3 and will be watched closely as an input for GDP forecasts fur future quarters. Offshore we have NZ trade balance this morning from across the pond before tonight we have second tier data due out of the US in the form of December factory orders, home sales data and testimony from Fed Chair Powell.
We expect the Aussie to continue to take its cues from global risk appetite and see AUD/USD as being relatively well supported around 0.7150 and 0.7120 handles. Topside moves are expected to catch resistance on approach to 0.7200 before 0.7220.
The New Zealand dollar enjoyed modest gains through trade on Tuesday, edging marginally higher on a sustained appetite for risk and broader USD softness. The New Zealand dollar stopped just short of breaking through 0.69, touching intraday highs at 0.6898 as investors and markets stabilized, consolidating recent moves and electing to maintain ranges.
Resistance remains intact on moves approaching 0.69/0.6920 as attentions turn to Domestic Trade Balance data and a slew of US indicators for direction through Wednesday.
- USD/CAD: 1.3119 - 1.3176 ▼
- EUR/USD: 1.1373 - 1.1404 ▲
- GBP/USD: 1.3233 - 1.3336 ▲
- AUD/USD: 0.7151 - 0.7199 ▼
- NZD/USD: 0.6861 - 0.6902 ▼