The U.S. Dollar is trading in familiar ranges after losing ground throughout yesterday and overnight sessions. Stock indexes fell flat as traders start weighing divergent outlooks and political downside, as well as upside, risks. Investors are not as prone to take risks at the moment, but the Dow Jones is close to hitting 20,000 points while the greenback continues to swim around multi-year highs against most peers.
There is no major data to push further momentum, but in today’s markets anything is possible. Fed Chairwoman Janet Yellen will be speaking at a few engagements in the coming weeks prior to the January 19th meeting. We will monitor her influence, particularly at the Commonwealth Club in San Francisco on Wednesday January 18th.
The Yen has been on a tear, rising by 1.5% in the last two days. Markets starting to dwindle after being on a hot streak are starting to benefit the safe-haven asset. The Bank of Japan is slated to meet on January 19th where the bank could potentially add to their stimulus. More importantly, we want to find out if there is talk about coupling with fiscal policy as Shinzo Abe’s government rolls up its sleeves to boost growth in a much deflated country.
Also, will the Yen follow the 2016 trend of JPY appreciation after every meeting regardless of the decision? We shall see. In December, the trend switched, but the currency has stayed resilient unlike others.
Pound Sterling stopped falling, especially after Retail Sales for December revealed better-than-expected numbers. The “Hard Brexit” possibility is very real since UK lawmakers are starting to blatantly disregard any effects that leaving the European single market may bring.
Indeed, the Brits seem excited about the possibilities of working their own agreements, but ignore the potential everlasting damage of separating financial and business ties abruptly. Article 50 will likely be invoked by end of the first quarter, but now friction between the Prime Minister, the Conservative Party, and the Supreme Court will likely lead headlines in regards to the official Brexit process.