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Dollar pairs were all over the place for the most part of the session, but relatively hawkish FOMC minutes gave the U.S. currency a bit more support.

Meanwhile, lower-yielding currencies held on to their gains as geopolitical risks on potential U.S. airstrikes in Syria kept traders on edge. Even so, the Loonie managed to stay afloat as crude oil surged to its highest level since December 2014.

  • U.S. headline CPI down by 0.1% vs. projected flat reading in March
  • U.S. core CPI up by another 0.2% as expected
  • U.S. federal budget deficit narrowed from $215.2B to $208.7B vs. $191B forecast
  • FOMC minutes: Majority of policymakers support gradual hikes
  • FOMC minutes: Economic outlook strengthened in recent months
  • FOMC minutes: 12-month inflation to rise in coming months

Major Events/Reports:

Mostly upbeat FOMC minutes

Slightly weaker than expected CPI readings gave dollar bulls doubts early in the session as the headline figure posted a 0.1% dip – its first negative reading in 10 months – versus the projected flat reading.

The core CPI simply came in line with the consensus of another 0.2% uptick. So much for expecting upside surprises after seeing stronger than expected PPI data!

However, Fed officials were actually pretty chipper in their March huddle as the minutes revealed that most committee members agreed that the economic outlook strengthened in recent months. In particular, the FOMC minutes indicated:

“A number of participants indicated that the stronger outlook for economic activity, along with their increased confidence that inflation would return to 2 percent over the medium term, implied that the appropriate path for the federal funds rate over the next few years would likely be slightly steeper than they had previously expected.”

FOMC members did acknowledge that household spending slowed but suspected this was due to transitory factors like the seasonality of data and the delayed payment of personal tax refunds. Policymakers also warned that a potential trade war could pose downside risks.

Other than that, the minutes contained more optimistic views, particularly when it came to inflation. Members agreed that annual inflation could pick up in the coming months, adding that higher crude oil could continue to lift price levels and that a modest overshoot of their 2% target could be possible.

Continued risk-off vibes

Market participants haven’t been in the mood to take on more risk for the past couple of sessions due to heightened geopolitical tensions over Syria, forcing equities to end the day in the red:

  • Dow 30 index is down 218.55 points to 24,189.45 (-0.90%)
  • S&P 500 index is down 14.68 points to 2,642.19 (-0.55%)
  • Nasdaq is down 25.27 points to 7,069.03 (-0.36%)

But even with Trump’s tweets on how airstrikes “will be coming” the truth is that the POTUS is still undecided on their military options and has to consult with the U.S. Defense Secretary first.

Confidence in the Trump administration also took a hit when House Speaker Paul Ryan announced that he will not be seeking re-election after his term.

Gold has picked up on these safe-haven flows but interestingly enough, WTI crude oil managed to climb past its January high also on expected reductions in output if tensions flare in the Middle East.

  • Gold is up to $1,356.30 per troy ounce
  • WTI crude oil is up to $66.81 per barrel
  • Brent crude oil is up to $71.95 per barrel

Major Market Mover(s):

CAD

The oil-related Loonie shrugged off risk-off vibes to join the commodity in its strong rallies spurred by geopolitical risks in the Middle East.

USD/CAD tumbled from a high of 1.2624 to a low of 1.2544, CAD/JPY surged from 84.74 to a high of 85.10, EUR/CAD is down to 1.5551, and GBP/CAD is down to 1.7836.

JPY

The lower-yielding yen continued to rake in safe-haven gains, especially since U.S. bond yields sank during the session.

USD/JPY is down from 106.94 to a low of 106.64 before popping briefly higher after the FOMC minutes, EUR/JPY is down to 132.20, NZD/JPY fell from 78.78 to a low of 78.52, and AUD/JPY dipped to 82.69.

Watch Out For:

  • 12:30 am GMT: BOJ Governor Kuroda’s speech
  • 1:00 am GMT: Australia MI inflation expectations (3.7% previous)
  • 1:30 am GMT: Australian home loans (-0.3% expected, -1.1% previous)