Daily Roundup – Markets review 21/03/2019

Jay-Powell-FOMC-decision-preview

Daily Roundup – Markets review

March 21st

The Aussie Dollar has seen some activity against the greenback overnight, with yesterday’s more dovish than expected FOMC giving AUD a boost, followed by the marginally better than expected Australian employment reading which again served to bolster the currency. Gains have however proved difficult to sustain, with the Fed’s cautious tone over the health of the global economy plus little progress in terms of the US-China trade deal acting as a real brake on any swing into risk currencies.

The theme of safe havens was certainly played out on USD/JPY, which tumbled to a three week low during yesterday’s session. Given the dovish stance at the Fed, this could well push the Yen back into the spotlight in the weeks ahead, even with the dovish tones we’ve seen emerging from the BoJ since the start of the year. Tonight’s inflation reading from Japan will however be very much in focus. Expectations are for a modest uptick from 0.2% in January to 0.3% for February. Failure to deliver here would have the potential to quickly reverse yesterday’s losses for USD/JPY.

The Brexit pantomime continues, with Theresa May requesting a short extension and the EU replying that she can have one, so long as MPs, who have already rejected her deal twice, accept the offer next week. This startled markets as it does increase the risk of a no-deal Brexit, although the chance of seeing a long extension with scope for another referendum or indeed a general election cannot be discounted, either. It seems unlikely that the two day EU leaders’ summit that starts today will provide any definitive outcome, so this may leave GBP under pressure into the middle of next week. This does now seen set to run down to the wire, with the chance that some optimism will arrive towards the end of next week having the potential to see Sterling rally as the cliff-edge of a no-deal Brexit is finally avoided. Probably.

Technicals

We looked at AUD/NZD earlier in the week. This triggered the stated 1.0300 level before posting a modest rebound, but the downside pressures remain in tact. Fresh selling has the potential to again see the cross revisit 1.0300, before continuing down to the 1.0250 lows from 2016.