Forex Morning Briefing
$DXY, $EUR, $JPY, $GBP, $AUD
The US Dollar (.DXY) index, and Sterling, while the focus focus this week is on the FOMC, G-10 traders applauded the constructive Brexit news overnight and with most investors under-weighted GBP assets.
There was a scramble for topside exposure with Sterling (GBP) breaking well above its resistance. As for USD, it comes down to whether or not a steeper shift in the FOMC’s dot plots, as the priced in March interest rate hike in itself is not sufficient enough to extend USD’s appeal.
Euro (EUR) was trading at Dovish extremes entering the weekend but has bounced back with a vengeance after ” ECB sources” suggest the doves on the ECB board acknowledge QE should end this year and are okay with the market pricing in a Y 2019 rate hike. The single currency rallied 1.2260 towards 1.2360 Monday as short-term traders were caught off guard triggering some near-term stops.
USD/JPY is trading heavy as this pair should be the most prominent beneficiary of the re-emergence of the weaker USD, even more so in this very risk-averse market. The Abe political noise and equity market declines continue to dent sentiment.
The Ringgit (MYR) a commodity currency continues to under-perform in this risk-averse environment. But with the markets starting to price in a close call on Fed to shift to four rate hikes in Y 2018, the market has been paring back short USD/MYR and ASIA positions, so the Ringgit continues to struggle in here.
The prospect of a faster pace of Fed policy normalization and a risk-averse market provides a negarive backdrop for near-term Ringgit sentiment.