FOMC Member Chatter to Drive the USD

Earlier in the Day:

Economic data released through the Asian session this morning was limited to Australia’s April NAB Business Confidence figures, together with the release of the Bank of Japan’s monetary policy meeting minutes from the March meeting.

For the Japanese Yen, the BoJ minutes revealed member caution on coming out of the policy easing cycle too early, while acknowledging that the Japanese economy was likely to maintain its upward trend, with domestic demand expected to follow the anticipated upward momentum.

On inflation, member concern over recent weakness reinforced concern that the BoJ could not shift on policy any time soon, with members also concerned over consumption, which continues to be a bugbear for the Japanese government.

The Japanese Yen moved from ¥109.155 to ¥109.093 against the U.S Dollar upon release of the minutes that were not only dated, but also revealed few surprises. At the time of writing, the Yen was down 0.01% to ¥109.13 against the Dollar, giving up ¥108 levels hit earlier in the session.

For the Aussie Dollar, the NAB’s Business Confidence Index rose by 2 points to +10 index points, taking the index further ahead of the historical average +6 points.

• The business conditions index rose by 6 points to a record high +21 points to demonstrate solid business activity, with only manufacturing and retail industries seeing business conditions weaken.
• The retail sector has struggled amidst heightened competition that has contributed to softer inflation, with the retail condition index turning negative for the first time this year.
• The employment index improved, easing concerns over a slowdown in jobs growth in recent months, while forward orders slipped, whilst rising on a trends basis in the non-mining economy.

The Aussie Dollar moved from $0.75232 to $0.75292 upon release of the figures, before pulling back to $0.7523 at the time of writing, down 0.21% for the session.

In the equity markets it was a mixed bag, with the Nikkei kicking off the week in the red, weighed by a stronger Japanese Yen, while the ASX, Hang Seng and CSI300 made progress off the back of Friday’s rally in the U.S and sentiment towards the U.S – China trade talks that concluded after the Asian markets had closed on Friday.

The Day Ahead:

For the EUR, economic data is limited to March factory order figures out of Germany, which are forecasted to be EUR positive. Recent data out of Germany has certainly been on the softer side and, with inflation easing and domestic consumption taking a hit in March, the markets will be looking for signs of a rebound in the German economy. Industrial production and trade figures are also due out of Germany this week, which will give the markets some further guidance ahead of the ECB’s economic bulletin release on Thursday.

At the time of writing, the EUR was up 0.03% to $1.1963, with Friday’s softer wage growth figures out of the U.S seeing the Dollar on the back foot early on.

For the Pound, it’s a quiet day ahead with the UK markets closed, leaving direction in the hands of market sentiment towards monetary policy and Brexit ahead of a busy week of stats and Thursday’s BoE monetary policy decision.

Recent data has all but removed the prospects of a rate hike this week, but with the BoE Inflation Report also scheduled for release, there will be some guidance on when the BoE will be looking to make its move, a lack of progress on Brexit and soft economic indicators reason to hold for now.

At the time of writing, the Pound was up 0.15% to $1.3551, with the upside coming more off the back of a softer Dollar than any material shift in sentiment towards the UK economy and monetary policy.

Across the Pond, there are no material stats scheduled for release this afternoon, while FOMC members Bostic, Kaplan and Evans are scheduled to speak through the U.S session.

Following last week’s FOMC minutes that gave little away on whether there was a need to take a more aggressive path on monetary policy, FOMC member chatter will garner plenty of attention this week, particularly with inflationary pressures building, while wage growth disappointed at the end of the 1^st quarter.

At the time of writing, the Dollar Spot Index was down 0.01% to 92.558, recovering from a morning low 92.448, with plenty for the markets to consider through the week, including April inflation figures, noise on trade tariffs, FOMC member speeches and Trump’s decision on whether to pull out of the Iran nuclear agreement.

Across the borders, there are no material stats scheduled for release, while NAFTA talks resume later today, which could provide some direction, with market jitters over a possible outcome to negotiations in the coming days likely to weigh on the Loonie.

At the time of writing, the Loonie was down 0.06% to C$1.2854 against the U.S Dollar.