Article Highlights

  • FOMC member Evans: U.S. economy is on a good course, two or three hikes possible this year
  • FOMC member Kashkari: Not opposed to hiking when data improves
  • U.K. PM May confirms Article 50 date on March 29
  • French debate: Macron declared winner over Le Pen by Elabe poll
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A couple of not-so-hawkish FOMC members gave testimonies during the U.S. session but traders still seem to be more focused on the goings-on in Europe.

Major Events:

U.K. PM May confirmed official Brexit date – As I’ve mentioned in my earlier session recap, the U.K. government finally set the date for invoking Article 50. According to May’s spokesperson, they have informed the European Council that they plan on starting the formal negotiation process by March 29.

While this reduces “Will they or won’t they?” speculations among market watchers, it also puts the U.K. economy in uncharted territory as it stands to give up access to the single market in exchange for immigration controls. The negotiations probably won’t be smooth sailing as EU officials are keen on cherry-picking what benefits the U.K. can hold on to while May has stressed that they want to get the “best possible deal” for trade. Here’s what’s next for the U.K. now that the official Brexit process is kicking off.

Speeches by FOMC members Evans and Kashkari – Remember that dissenter who voted to keep rates on hold during the latest FOMC meeting? In his testimony, FOMC member Kashkari shed light on why he thought that tightening wasn’t the appropriate choice just yet. He explained that the labor market has not fully recovered and that wage and inflationary pressures are still slow.

Kashkari did say that he isn’t opposed to hiking rates when data improves but clarified that he’s not seeing those green shoots yet, adding that the Fed should wait for inflation to hit the 2% target before increasing interest rates. He also emphasized that he’d push for balance sheet adjustments in their next meeting.

As for the usually-dovish FOMC member Evans, he acknowledged that the economy is on a good course, keeping the central bank on track towards making two or three hikes this year. He also expressed confidence that inflation could keep climbing but warned that that the pickup in wages is still weaker than expected.

French election debate – Forex junkies also tuned in to the French presidential debates, trying to get a clue on which candidate could wind up taking the lead in the polls after the event.

Fortunately for the shared currency, the Elabe poll revealed that Macron advanced against Le Pen, further dousing fears of a “Frexit” and instability in the region, and Fillon who was placed under formal investigation for allegedly diverting public funds. If you’re wondering why this is a big deal, better read my buddy Forex Gump’s take on the French elections risks.

Major Market Movers:

GBP –  Sterling continued to sink as traders priced in uncertainties related to the upcoming Brexit negotiations.

GBP/USD slipped from 1.2411 to a low of 1.2335, GBP/JPY is down from 140.02 to a low of 138.90, EUR/GBP advanced from .8665 to a high of .8708, and GBP/AUD slid from 1.6068 to a low of 1.5962.

Watch Out For:

  • 12:30 am GMT: RBA policy meeting minutes
  • 2:00 am GMT: New Zealand credit card spending y/y

See also:

London Session Recap

Asian Session Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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