Article Highlights

  • U.S. initial jobless claims at 244K vs. 242K forecast
  • U.S. crude oil inventories up by 0.6M barrels vs. 3.4M forecast
  • FOMC member Kaplan: U.S. near full employment, 2% growth this year
  • Kaplan: Fed should act sooner rather than later
  • Treasury Secretary Mnuchin: Gov’t policies to have limited impact in 2017
  •  Mnuchin in no rush to start investigation on Chinese currency manipulation
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Dollar bears were at it again as the “Trumphoria” started to fade on U.S. Treasury Secretary Mnuchin’s remarks. Pound bulls, on the other hand, continued to charge.

Major Events:

Treasury Secretary Mnuchin’s testimony – Promises, promises… The Trump administration seemed less aggressive than usual with their plans to push for higher infrastructure spending and brand China as a currency manipulator, as Treasury Secretary Steven Mnuchin also hinted that the Donald’s “phenomenal” tax reform is still in the balance.

Recall that Trump’s campaign promises included 4% GDP growth but Mnuchin downplayed this by saying that government policies would have a limited impact this year and that the economy could expand by 3% at best. He acknowledged the need for tax cuts and banking deregulation but added a much-needed dose of reality in saying that these aren’t likely to come into play until 2018.

“Regardless of when they go in place, this won’t really impact the economy until next year when you begin to see changes in behavior,” Mnuchin explained. “And it will take a couple years to get growth.”

FOMC voting member Kaplan’s speech – Fed official Kaplan dropped a couple of hawkish beats in his testimony, citing that the U.S. central bank should tighten sooner rather than later. He assessed that the economy is nearing full employment and is poised for 2% growth this year, nothing dollar traders haven’t heard before. He added that monetary policy accommodation can be removed gradually and patiently as well.

Major Market Movers:

GBP –  Sterling held its ground against its peers once more, even though there were no major reports out of the U.K. economy.

GBP/USD popped up from 1.2452 to a high of 1.2562, GBP/JPY is up from a low of 140.08 to 141.60, EUR/GBP slid from .8467 to the .8430 area, and GBP/AUD recovered from 1.6155 to 1.6280.

USD –  The Greenback’s legs gave way as dollar traders warmed up to the idea that the Trump administration might not be as aggressive in terms of economic reforms as initially hoped.

EUR/USD rose from 1.0546 to a high of 1.0596, USD/CHF dipped from 1.0098 to a low of 1.0053, USD/JPY is down from 113.20 to a low of 112.56, and USD/CAD dropped back to 1.3100.

Watch Out For:

  • 9:30 am GMT: U.K. BBA mortgage approvals

See also:

London Session Recap

Asian Session Recap

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