OPENING COMMENT
The early session of trade on Wednesday has been largely consolidative with all major currencies mildly offered to flat against the buck. Despite a better than expected UK Nationwide consumer confidence result in early Asia, Sterling still remains the laggard, with traders not able to forget about Tuesday’s devastating industrial production numbers. Meanwhile, the Australian Dollar is still the darling of the FX market, with Tuesday’s pivotal rate hike generating a lot of fresh buy interest on a further widening of yield differentials in favor of the antipodean. It is however somewhat ironic that Australian data releases on Tuesday in the form of trade, and Wednesday in the form of home loans, have been weaker than forecast. Fed Hoenig was on the wires with a rather balanced and arguably hawkish statement after saying that while he did not support a tight monetary policy in the current environment, he felt that the Fed would have to remove its very accommodative monetary policy sooner than later. Asian equities have been performing well following Tuesday’s strong close in US equities, and commodities, particularly gold, have also been well bid. The negative USD press continues into Wednesday, with more articles coming out discussing the end of the greenback, with major economies starting to shift reserves away from US Dollars. An IMF official has come out saying that he sees no reason for the ECB to hike rates over the next 12 months. Finally, the BOE kicks of its 2-day policy meeting today. Looking ahead, Swiss unemployment data (4.1% expected) is due at 5:45GMT, followed by the more significant Eurozone GDP (-0.1% expected) at 9:00GMT.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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