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Market watch - 24th March 2017

The Greenback was mixed in fairly tight ranges overnight, but continues to be generally weaker in the wake of last week’s Federal Reserve Bank meeting.  The Buck traded quietly overnight as Federal Reserve Chair Yellen didn’t touch on economics in her speech yesterday, and market participants are squarely focused on the US healthcare vote. Indeed, President Donald Trump made an ultimatum that Congress either vote on the American Healthcare Act today or be stuck with Obamacare for good.  Currently, there is a significant amount of infighting between Republican factions about the reforms.  Speaker of the House Paul Ryan (R-WI), arguably the most powerful Republican legislator in Washington, did state that ‘for seven-and-a-half years we have been promising the American people that we will repeal and replace this broken law … and tomorrow we’re proceeding.”  This vote could potentially be used as a barometer on the chances of other policies proposed by President Trump passing in the foreseeable future.  A successful vote will demonstrate to the American people that this administration can effectively cooperate with Congress to legislate their campaign promises.  However, a failed vote could underpin a perception by some of a fractured relationship between President Trump and Congress which could result in difficulty moving forward with the changes advocated during the campaign. The US Durable Goods data is on tap for this morning, but all eyes are on Washington today.



The Canadian Dollar is trading a bit weaker as oil remains soft and ahead of the key CPI data set for release this morning.  On the oil front, OPEC and non-OPEC countries meet in Kuwait this weekend to discuss the production cut agreement and its effectiveness.  On the other hand, recent economic data out of Canada has been very positive.  Canadian Employment data has been strong since September with significant job growth and a notable drop in unemployment.  Last month the Canadian CPI reading was significantly better than expected, and Retail Sales data was also higher than expected.   Assuming a strong number today, it will be interesting to see whether the Bank of Canada (BoC) will continue with their explicitly dovish stance in the near future. 


EURUSD has rallied back nearly to the highest level since November 11 which it hit Tuesday after a limited sell-off yesterday as both Eurozone Flash Manufacturing and Services PMI came in just above expectation. The Manufacturing PMI came in at 56.2 compared to 55.3 expected, while Services PMI data was released at 56.5 versus the consensus of 55.4 this morning.     The European Central Bank (ECB) said that survey data pointed to robust Q1 Eurozone growth, alongside increasing the emergency funding cap for Greek banks to Euro 46.6 billion.  This positive ECB outlook is helping fuel market participants’ expectation of some potential steps away from Quantitative Easing (QE) by the ECB in the future.   That said, the ECB’s key Minimum Bid Rate is still at 0%, the bank deposit rate remains at -0.4%, and the Eurozone central bank remains committed to their asset purchase program for the remainder of this year.  While it seems the ECB has been less dovish recently, their actions remain accommodative at this time.


Cable is trading just a touch lower but remains in striking distance of its one-month peak from yesterday.  Despite Article 50 set to trigger next Wednesday, the British Pound has been quite strong.  Sterling got a boost from the reading of February retail sales yesterday as the figure came in at +1.4%, which was a huge improvement on Januarys -0.5% figure and better than the estimated +0.4%.  Some analysts had expected a weak figure, but this positive surprise helped boost Sterling yesterday. Bank of England (BoE) Deputy Governor Ben Broadbent added to the bullish Pound sentiment, saying that it was quite possible that interest rates could go up in the UK.   This statement combined with MPC Member Kristin Forbes dissenting vote to raise interest rates last Thursday as been very supportive of Sterling despite likely Brexit developments in the near future.  However, the Pound is not likely to be out of the woods yet as the start of Brexit negotiations with the European Union (EU) continue to loom large.

The Commodity Currencies generally traded lower due to soft oil and iron prices.  The Aussie, Kiwi, and Rand all traded lower overnight.  Traders will be watching any news from the meeting in Kuwait this weekend for guidance regarding whether the OPEC production cuts will be renewed. 


The Japanese Yen softened a touch with the US 10-year Treasury yield ticking up just a bit.  While the 10-Year Treasury yield is generally important for the US Dollar as higher yields for what is considered the safest asset in the market make it more attractive.  However, USDJPY in particular has been following US Treasury yields up and down.  Lower than expected Flash Manufacturing PMI for Japan last night did not help the Yen either.  However, the Yen remains very strong as a result of the market selling the Buck in the wake of last week’s Fed meeting coupled with its safe-haven status.


The Swissy followed the Euro stronger in tis pairing with the US Dollar overnight.  The Swiss currency has benefited from traders selling the US Dollar against the Euro combined with its safe-haven status.  The Swiss National Bank (SNB) continues to hold significant Euro reserves from the days of peg mechanism which keeps Swiss tracking Euro versus the Buck for the most part.