Less Volatility than Expected in the FX Markets
We were expecting a little more volatility in the FX markets
today, with the data releases offering a little more perspective on
interest rate policy. In the US, the CPI numbers were as expected, with
the core y/y rate easing back a touch to 2.1% from 2.2%.
Headline m/m was a touch higher, but the recovery in Oil price accounted
for this. The USD response was pretty muted as a result, with mixed
fortunes seen across the board. Cable came off the highs through 1.4500
after UK inflation was softer than expected, but even here we saw the
downside losing momentum in the lower half of the 1.4400’s.
EUR/GBP
gains look tentative at best, with the overnight moves based on the
ORB/Telegraph poll showing the remains way out in the lead cancelled out
by TNS later in the day.
AUD/USD gains after a less dovish RBA minutes
ran out of steam well ahead of .7400, trading back in the low .7300’s
before levelling out again.
NZD did pretty much the same below .6800,
with the Fonterra auctions in line with the futures market indications
as WMP rose 3%.
USD/JPY gains through 109.50 petered out ahead of 110.00
as stocks turned sour again; limited impact seen on the CHF but
marginally higher vs both the EUR and USD on the day.
USD/CAD looks
intent on 1.3000, aided by Oil prices coming off their highs. That said,
both WTI and Brent hit a fresh cycle peak, but CAD has benefitted
little in relative terms since the strong recovery from sub 1.2500.
Focus turns to the FOMC minutes Wednesday evening.
