Article Highlights

  • RBA keeps optimistic tone in latest meeting minutes
  • Japan’s flash manufacturing PMI up to 53.5 vs. 52.1 expected, 52.7 previous
  • Japan’s all industries activity slips by 0.3% vs. -0.2% expected, 0.4% increase in November
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The Greenback dominated most of its major counterparts, as a lack of major economic reports turned investor attention to higher bond yields and the upcoming FOMC meeting minutes release.

Major Events:

RBA’s meeting minutes – Looks like the Reserve Bank of Australia (RBA) is sticking to its guns! In its meeting minutes released earlier today, the central bank maintained its optimistic tone for the economy.

Governor Lowe and his gang repeated that the 0.5% GDP dip in Q3 2016 was due to “temporary factors” such as disruptions to coal supply and bad weather even as slow consumption growth also factored in. The RBA still expects the economy to rebound in Q4 and to clock in a 3.0% growth in late 2017.

The central bank also reiterated several of its points already mentioned in its last policy decision:

  • The economy continues to recover from a mining boom
  • The low exchange rate has assisted the economy’s transition and that an appreciating exchange rate would complicate the adjustment
  • Labor market indicators remain mixed, enough to cause uncertainty over its momentum
  • The RBA noted China’s growth boosted by easy fiscal and monetary policies; Uncle Sam’s potential growth if and when fiscal stimulus boosts activity, and improvements in Japan’s economy due to improvements in the labor market

Overall, the RBA still believes that its current set of monetary policies will be enough to push inflation to its targets and economic to a sustainable growth.

Dollar domination – U.S. traders might not have weighed in during the last trading session, but dollar bulls sure got busy during the Asian session!

The Greenback dominated its higher-yielding counterparts despite a lack of major data on the docket. One possible reason is that the yield on benchmark 10-year notes inched higher from 2.425% on Friday to 2.443% during the Asian session.

It might have also helped that the Fed will print its meeting minutes tomorrow at 8:00 pm GMT. With Yellen and her gang consistently hawkish in their recent statements, it’s no surprise that market players are expecting hawkish tones in the release.

Market Movers:

USD – The Greenback gained pips across the board thanks to higher bond yields and the prospect of a hawkish FOMC meeting minutes release later this week.

USD/JPY jumped by 56 pips (+0.50%) to 113.68, GBP/USD fell by another 26 pips (-0.21%) to 1.2439, and USD/CHF inched 31 pips (+0.31%) higher to 1.0059.

EUR – Asian session traders finally caught up to the jitters over Le Pen gaining ground in France’s latest opinion polls.

EUR/USD dropped by 36 pips (-0.34%) to 1.0579, EUR/GBP dipped by another 11 pips (-0.13%) to .8505, and EUR/AUD slipped by 22 pips (-0.16%) to 1.3790.

Watch Out For:

  • 8:00 am GMT: Switzerland’s trade balance (3.03B CHF expected, 2.72B CHF previous)
  • 8:45 am GMT: French final CPI expected to remain at -0.2%
  • 9:00 am GMT: French flash manufacturing PMI (53.5 expected, 53.6 previous)
  • 9:00 am GMT: French flash services PMI (53.8 expected, 54.1 previous)
  • 9:30 am GMT: German flash manufacturing PMI (56.2 expected, 56.4 previous)
  • 9:30 am GMT: German flash services PMI (53.6 expected, 53.4 previous)
  • 10:00 am GMT: Euro Zone flash manufacturing PMI (55.0 expected, 55.2 previous)
  • 10:00 am GMT: Euro Zone flash services PMI expected to remain at 53.7
  • 10:30 am GMT: U.K. public sector borrowing (-14.4B GBP expected, 6.4B previous)
  • 11:00 am GMT: U.K. inflation report hearings

See also:

U.S. Session Recap
London Session Recap

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