Markets Relatively Flat ahead of FOMC Announcement

 

USD

The U.S. Dollar is trading in mostly tight ranges primarily because of anticipation of many risk events at the end of the week. Data-wise the ADP Employment indicator showed an increase of 177K jobs, just slightly above expectations of 175K, but the prior month’s figures were revised downward. Later at 2PM the Federal Reserve will reveal its decision, but will not hold a press conference afterwards.

Policy divergence is one factor that can push the dollar upward, but if the tone is dovish considering the fact that economic numbers have been underwhelming, the “buck” could suffer on speculation that the Fed will only hike once more in 2017.

Oil prices have improved after reaching a six-week low yesterday on the basis of further output cuts by OPEC producing countries and also Russia. Peso remains around its average for the year, while the “loonie” has sunk to a 14-month low. CAD could recover if WTI Crude hits and stays above $50.0/barrel.

 

EUR

The Euro continues to stay afloat ahead of the French elections with the help of good data and ongoing efforts to support Greece. The troubled touristic nation that has stolen financial mishap headlines for the last eight years agreed to further spending cuts and other austerity measures in order to keep being fed by Brussels. It is this type of intervention that some economists fear may be needed in Italy as the country faces banking irregularities and inefficiencies to add to its fragile political state.

Matteo Renzi, the Prime Minister who had to leave after his referendum on amending the constitution failed, is back to lead his Democratic Party to combat a rising anti-establishment party, the Five Star movement. Threats to status-quo leadership across the continent will weigh on the Euro in the long-term, but for now focus will be on France’s willingness to say “No” to anti-EU Marine Le Pen.

 

GBP 

The Pound continues to surprise traders, rising as a result of surprisingly positive indicators. An indicator of retails sales showed that British products are higher in price, highlighting inflationary growth in the UK as a result of the weak Pound since Brexit. In addition, manufacturing is improving at a multi-year best pace.

Aside from the incredible resilience in certain aspects of the economy, Prime Minister Theresa May seems to have been fueled by the report of a bad dinner with EU officials to reaffirm her commitment to working on a beneficial Brexit for her constituents. When it comes to negotiations with the EU, she claimed she’d be a “bloody difficult woman.”