USD
The U.S. dollar has settled into relatively tight ranges before a day full of potential risk events. The Bloomberg Dollar Spot Index is mostly unchanged from yesterday’s session but has retreated in recent days, giving back all of its post-election gains.
At 8:30 Eastern, Janet Yellen will be speaking at a Fed Event in Washington. It is uncertain whether she will address monetary policy directly but investors are eager to find any further guidance from the central bank chair. Earlier this month, the Federal Reserve raised interest rates by a quarter of a percent, but caused the greenback to falter slightly. The hike has been dubbed a “dovish hike” because expectations of further hikes were unchanged.
Today is also a critical day on Capitol Hill. President Trump and Congressional Republicans are attempting to cobble together enough votes to repeal “Obama care.” At last count, there were conservative holdouts from the most conservative caucuses who say the bill does not go far enough. There has also been dissent from moderates who cite the non-partisan Congressional Budget Office report that said 24 million people more people would be uninsured in the next ten years under “Trump Care.” If President Trump is unable to pass his heath care bill, it reduces the likelihood that he will be able to pass the promised corporate tax cuts which could lead to a sharp sell-off in equity markets.
JPY
The Japanese yen has extended its recent gains and has strengthened for seven straight days against the U.S. Dollar. The bulk of the move came on Tuesday after U.S. stocks fell more than a percent and the Japanese Nikkei dropped over 2.0%. As a result, the yen is currently trading at its strongest level in four months versus its American counterpart.
If President Trump and Paul Ryan’s attempt to repeal Obamacare fails this week, stock markets could come under renewed pressure which would likely benefit the safe-haven yen.
The yen is also benefiting from repatriation flows back in to Japan ahead of the close of the Japanese fiscal year on March 31.
GBP
The British pound shook off the apparent terrorist attack in London yesterday, and has continued its recent rise against the U.S. dollar. Indeed, the sterling climbed to its highest level in a month against the dollar after U.K. retail sales rebounded in February. The Office for National Statistics said that sales rose 1.4% after sliding 0.5% in January. The print beat forecasts for a 0.4% increase.
Today’s data added to a long slew of better-than-expected prints, boosting the sterling. Earlier this week, a report showed that annual inflation accelerated over the central bank’s 2.0% target for the first time in four years. Higher inflationary pressure and a resilient economy has spurred speculation that the Bank of England may find the scope to raise interest rates next year.
