We saw a continuation of the recent trend through most of yesterday’s trading with the dollar continuing to grind higher against the other majors. The equity markets were once again a bit of a mixed bag with the US markets finishing the day mainly in the red. The main event of the day was the release of Janet Yellen’s last Fed Meeting minutes and the brief initial reaction from the market was that they were slightly more dovish than expected which led to a sharp drop in the USD, however, further analysis led to the more Hawkish sentiment of late and the move was corrected swiftly with a March 25bps hike now firmly priced in.
Prior to this release in the US session we have the employment data out of the UK and the BOE Inflation Report Hearings, the unemployment rate increased by 0.1% leading to some pressure on the sterling however wages growth numbers are starting to look better and this was reiterated by MPC members later in the day with a May hike from them still well in play.
Looking ahead to today’s trading sessions and the cupboard is bare in Asian for economic data releases, so traders will be focusing on equity market moves and will continue to look for levels to buy dollars in the short term. Later in the day we have the UK Second Estimate GDP data due early in the London session before the markets focus will switch to the Euro and the ECB’s Monetary Policy Meeting Accounts. Into the New York session and early on we have the Canadian Retail Sales numbers being released before moving onto the US Crude Oil Inventory Levels later in the day.
We expect the dollar to continue to grind higher over the course of the day while the current sentiment remains, however any swift change in the equity markets could lead to a reversal of the recent recovery.