Investors are expecting the release of the FOMC minutes and, more crucially, the release of non-farm payrolls in the US later this week. Following a robust surge in government bond yields, the yen has remained the currency with the worst performance for the time being. The pound has managed to outperform the euro. Although the dollar is the second strongest currency, it is still stuck in a range, except against the yen.
FX market view and FOMC minutes expectation
The dollar is weakening ahead of the ADP employment report. The dollar index is down, but it remains around the 96.00 level. Dollar/yen has reversed lower after trading at its highest level since January 2017, near 116.35 on Tuesday. The single currency is still heavy but is trying to overcome the $1.1300 psychological number. The British pound is gaining some ground near $1.3540 after the rebound off the one-year trough of 1.3165. US futures look to be mixed as the S&P 500 and Nasdaq 100 suggest a negative open, though the Dow Jones is headed for a positive open.
The minutes of the FOMC meeting will be critical. Since the Fed’s December meeting expedited tapering, markets will look for signs on when the requirements for liftoff will most likely be met. Kashkari indicated yesterday that he anticipates two rate increases in 2022 but cautioned that high prices could enhance inflation expectations.
Since the ECB doesn’t meet again until February 3rd, it will have more time to figure out how the economy is performing as more data comes out. That said, this meeting may not be that important the Bank has already said that PEPP will end in March as planned.
OPEC agreed to add production in February
OPEC+ decided to boost output by 400,000 bpd in February, as major oil producers expect just a little impact from the omicron variant. WTI futures have turned positive in recent days, around $73.07.
In other markets, gold prices are holding above the 200-day simple moving average (SMA) as well as well above the $1,800 round number.
