U.S. Session Recap – April 10, 2014

  • FOMC minutes show mixed views on rate hike forecast
  • Fed official Tarullo: Rate hikes must be done gradually
  • Fed official Evans: First rate hike might happen in 2015
  • U.K. RICS house price balance up by 57%
  • Japanese core machinery orders down by 8.8%
  • Australian jobs data, Chinese trade balance due

What a letdown! Dollar bulls were counting on the FOMC meeting minutes to give the Greenback a boost but the reaction to the report turned out to be quite the opposite! EUR/USD surged to a high of 1.3862, GBP/USD broke above the 1.6800 major psychological resistance, and USD/JPY struggled to hold on to 102.00.

As it turns out, several Fed policymakers didn’t share Yellen’s upbeat outlook for the U.S. economy. Recall that Yellen hinted of a possible rate hike around six months after asset purchases end, but other FOMC members thought that this forecast was too optimistic. Market participants then concluded that Yellen’s rate hike time frame was just a personal opinion and not a consensus among Fed officials.

A couple of Fed officials, namely Tarullo and Evans, shared their rate hike views. For Tarullo, the rate hike process must be conducted gradually in order to prevent inflationary shocks. Evans said that the first Fed rate hike might take place in 2015 but cautioned that rates will not increase if inflation stays below 1%.

Meanwhile, the U.K. reported a 57% in its RICS house price balance report, higher than the estimated 44% increase. The previous month’s figure also enjoyed an upward revision from 45% to 47%, allowing the pound to take full advantage of dollar weakness and pushing GBP/JPY closer to the 171.50 minor psychological handle. Japan showed a weaker than expected core machinery orders report, which printed an 8.8% decline instead of the projected 3.2% drop.

In today’s Asian trading session, we’ll get to see Australia’s jobs report for March. After adding 47.3K jobs in the previous month, only a 7.3K increase in hiring is expected for March. This might push the jobless rate up from 6.0% to 6.1%, which might be bearish for the Aussie. Also due in the next few hours is the Chinese trade balance report, which might print a narrower deficit from 23.0 billion USD to 0.9 billion USD.

See also:

London Session Recap

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