Brexit, Draghi and the Oval Office to Drive the GBP, EUR and Dollar

Earlier in the Day:

There were no material stats released through the Asian session this morning, with the BoJ’s monetary policy meeting minutes from the December meet the only release on the economic calendar for the markets to respond to.

Outside of the numbers however, there was plenty to consider, with the end to the U.S government shutdown, an anticipated resumption of trade talks between the U.S and China, the UK’s parliamentary vote on Brexit Plan B and Wednesday’s FED policy decision and rate statement there to consider.

For the Japanese Yen, the monetary policy meeting minutes provided few surprises, with the minutes considered dated following the BoJ’s revision to growth and inflation forecasts in the January meet.

The Japanese Yen moved from ¥109.414 to ¥109.418 against the U.S Dollar, upon the release of the minutes, before easing to ¥109.42 at the time of writing, up by 0.12% for the session. Early support came in spite of optimism across the broader market, a weaker Dollar providing strength early on.

While the Aussie markets were closed in recognition of Australian Day, there was early support for both the Aussie Dollar and Kiwi Dollar. Hopes of a resolution to the extended U.S – China trade war and expectations of a more dovish FED on Wednesday provided support early on. At the time of writing, the Aussie Dollar was up 0.2% to $0.7193, with the Kiwi Dollar up 0.16% to $0.6850.

For the Aussie Dollar, it’s a busy week ahead though, so we can expect volatility to pick up as the week progresses, the markets seemingly brushing aside last week’s mortgage rate hike by NAB that raised the possibility of a near-term rate cut by the RBA to limit the impact on bulging household debt.

In the equity markets, it was a mixed bag, the Nikkei feeling pressure from the stronger Japanese Yen, down by 0.20%, while Hang Seng and CSI300 kicked off the week in the green, the pair up by 0.66% and by 1.02% respectively.

The Day Ahead:

For the EUR, it’s a quiet day ahead, with no material stats scheduled for release. While there are no stats, ECB President Draghi is scheduled to speak through the day, which could pin back the EUR should there be any chatter on the economic outlook and monetary policy

Adding to the direction through the day will be sentiment towards the Wednesday’s FED policy decision and tone of the rate statement and U.S – China trade talks that will resume mid-week. Risk on should provide some support from the EUR, though Draghi could undo any gains with ease should he choose to…

At the time of writing, the EUR was up 0.07% to $1.1414, with Draghi and risk sentiment the key drivers through the day.

For the Pound, there are no material stats scheduled for release through the day, leaving Brexit, Plan B and tomorrow’s Parliamentary vote as the key drivers. The vote may ultimately be a non-event, the bigger issue being whether the markets see the government being able to renegotiate an acceptable deal should an extension be the chosen path.

With the backstop remaining a stumbling block and Ireland stating that it would not yield, the British PM will have her work cut ahead of tomorrow’s vote.

We could even end up back in a no-deal scenario, which should raise the question of whether a 2^nd referendum would be appropriate in the interest of Britain and its voters.

At the time of writing, the Pound was down by 0.01% to $1.3195, with updates on Brexit the key driver through the day.

Across the Pond, there are no material stats scheduled for release through the day, with a lack of material stats likely to leave the markets to focus on the Chicago FED National Activity Index and Dallas FED Manufacturing Index figures due out later today.

Outside the numbers, expect the Oval Office to be front and centre, with the outlook towards Wednesday’s FOMC policy decision and rate statement likely to pin back the Dollar early on in the week.

At the time of writing, the Dollar Spot Index was down 0.06% to 95.732.

For the Loonie, it’s a quiet day on the economic calendar, leaving market risk sentiment, driven by expectations of a resolution to the extended U.S – China trade war, to provide direction early on in the week, though expect some influence from crude oil prices.

The Loonie was up 0.01% to C$1.3217, against the U.S Dollar, at the time of writing.