The U.S. dollar saw a modest boost overnight, with the Bloomberg Spot Dollar Index rising 0.1%. The greenback pushed to its highest level versus the Euro since early January but fell against the Japanese yen.
Existing home sales is poised to cross the wire at 10 a.m. but attention will quickly shift to the release of the minutes from the Federal Reserve’s last meeting. The Fed held rates on hold last month, but traders will be looking for clues as to when the next rate hike might be. Extra attention will be spent on the Fed’s discussion of building inflationary pressures. Odds that the central bank will boost rates by a quarter of a percentage point in March now stand at 43.0%, up from the mid-30s early last week. If the meeting minutes are perceived as “hawkish”, interest rate expectations would spike and the dollar would benefit. Conversely, a dovish or uncertain tone could cause the greenback to lose its recent momentum.
The British pound reversed its gains from late yesterday following the release of lukewarm economic data. British GDP in the fourth quarter grew 0.7%, beating the previous estimate of 0.6%. However, a breakdown of the number shows that business investment fell in the quarter which is likely continued fallout from the Brexit vote.
The Brexit Bill, which would allow Prime Minister Theresa May to trigger Article 50 and start the process of leaving the EU appears to be on track. The bill is currently in the Upper House of Parliament and it is reported that a number of Lords are attempting to make amendments to the bill.
The Euro fell to a six-week low against the U.S. dollar as political uncertainty is weighing on the common currency. A poll released yesterday showed that second round support for French far-right presidential candidate Marine Le Pen crept higher. Le Pen is still as a heavy underdog to win the presidency, but markets are taking notice. The spread between German and French 10-year bonds rose to the widest margin since the financial crisis. Le Pen has argued that France should leave the Euro all together.