There weren’t a lot of reports printed during the Asian session, so forex traders started unwinding and/or placing their bets ahead of this week’s biggest event: the FOMC statement.
- U.K.’s Rightmove house price index (1.5% expected, 0.8% previous)
- Japan’s trade surplus narrowed down by in February
- Weekend polls note decreased support for Shinzo Abe
- All eyes on Fed’s “dot plot” chart
Triple threat in Japan
Data printed earlier saw Japan’s trade surplus narrowing down sharply in February. A closer look tells us that exports only grew by 1.8% from a year ago in February, while imports rocketed by a whopping 16.5% for the month.
It also didn’t help that weekend polls revealed waning support for Prime Minister Shinzo Abe. If you recall, the PM is embroiled in a cronyism scandal involving a land deal. For investors, threats to Abe’s position are taken as threats to his “Abenomics.”
Last but not the least is your good ol’ risk aversion. With Trump looking like he’s not going to be flexible with his trade plans anytime soon, the Asian markets are bracing for weaker demand from the largest economy in the world.
Jitters ahead of Fed’s event
In a few days we will head from the FOMC members, who are expected to vote for a 25 basis-point rate hike this month.
Since the move is already expected from the central bank members, market players will instead focus on the Fed’s “dot plot” chart and see if FOMC members feel like adding another rate hike to the three they’ve pencilled in this year.
Remember that, this time around, another rate hike won’t necessarily translate to dollar strength. For one thing, investors are worried that the Fed could be stifling stimulus too fast too soon given that Uncle Sam is dealing with twin deficits as well as Trump’s administration shakeup and protectionist tariff plans.
- Nikkei is down by 0.80% to 21,502.4;
- Australia’s A SX 200 us down by 0.24% to 5,968.0;
- Hang Seng is up by 0.19% to 31,562.1, and
- Shanghai index is up by 0.17% to 3,275.369.
Commodity prices didn’t get a break, either, especially since oil prices were weighed by oil oversupply concerns.
- Gold is down by 0.11% to $1,312.30;
- Brent crude oil is down by 0.41% to $65.83, and
- U.S. WTI is down by 0.39% to $61.99.
Major Market Mover(s):
Another day, another chance for the yen to make some gains! While the low-yielding currency stepped back early in the session, it soon recovered (and then some) when traders started getting really worried about an uber hawkish Fed decision.
EUR/JPY is down by 43 pips (-0.33%) to 129.80;
NZD/JPY is down by 22 pips (-0.29%) to 76.23;
GBP/JPY is down by 38 pips (-0.26%) to 147.33, and
CHF/JPY is down by 31 pips (-0.28%) to 110.94.
Watch Out For:
- 9:00 am GMT: Italy’s industrial production (-0.5% expected, 1.6% previous)
- 10:00 am GMT: Italy’s trade balance (4.87B EUR expected, 5.25B EUR previous)
- 10:00 am GMT: Euro Zone’s trade balance (22.6B EUR expected, 23.8B EUR previous)