Ahead of the Federal Reserve’s all-but-guaranteed interest rate hold tomorrow afternoon, geopolitical tensions are in heavy focus today and the United States Dollar is trading a touch stronger against most of its major and minor peers this morning.
Overview
The overnight session did see a mild selloff for USD, but most if not all of this ground has now been recovered as traders turn their attention to both the ongoing Russo-Ukrainian and Israeli-Hamas conflicts. Israel overnight launched airstrikes across Gaza that effectively ended the nearly two-month ceasefire between Israel and Hamas, the latter of which said these actions killed more than 300 people. Prime Minister Benjamin Netanyahu said that these strikes were undertaken in response to Hamas’ refusal to modify the ceasefire agreement and release the remaining hostages, and oil and gold both jumped in response. The Dollar may also be getting a very slight haven bid on the matter, along with further chatter ahead of President Trump’s scheduled meeting with Russian premier Vladimir Putin today. Putin is demanding a suspension of all weapons delivered to Ukraine during a US-proposed ceasefire between the two nations – such demands will undoubtedly be discussed today.
Germany, as well, is at the forefront of traders’ minds this morning ahead of a Bundestag vote that should see a massive spending stimulus package pass through German congress. While the vote may be largely a formality at this point, given that coalition leaders announced over the weekend a deal had been struck, the execution of such a large spending package will still be a big question for the Eurozone writ large for the remainder of this year. For the rest of the week, however, focus will likely shift away from Germany to the several central bank meetings over the next few days. The Federal Reserve, Bank of England, and Bank of Japan are all widely expected to hold the interest rates of their respective nations this week, but the tonality for each is likely to be quite different. The Fed may attempt to push back on fears of a US economic slowdown as overblown, while the Bank of England will be tasked with convincing markets that its policies are not overly restrictive given the UK’s lackluster growth the last several months. The Bank of Japan, meanwhile, still in the process of normalizing policy, will be watched for any forward guidance on when another interest rate hike may be on the table.
What to Watch This Week…
- Eurozone CPI, Wednesday
- Bank of Japan Rate Decision, Wednesday
- FOMC Rate Decision, Wednesday 2PM
- Bank of England Rate Decision, Thursday
- Monex USA Online is always open
Complete Economic Calendar can be found here.
JPY ⇓
Japanese Yen is sliding against the Buck again today, ahead of both the Federal Reserve and the Bank of Japan’s interest rate decisions tomorrow. Though no rate action is expected from either central bank, chatter that the BoJ is considering releasing a revision to its calculation methodology of underlying inflation is keeping the currency depressed to the tune of nearly half a percent weaker against USD. The new gauge is not likely, in markets’ views, to change the BoJ potential for hiking rates moving forward, though, so JPY could bounce from these lows during tomorrow’s meeting cycles.
GBP ⇓
Pound Sterling is also sliding against USD ahead of the Bank of England’s rate decision Thursday morning, also widely expected to hold interest rates steady. GBP briefly overnight touched its strongest point against the Buck since just after November’s presidential election, but has since slid back to relinquish a quarter of a percent of ground.The UK’s rather dismal economic growth picture remains in focus for the currency, and BoE policymakers will likely face questions later this week on if their current rate policies are too restrictive for the economic environment.
