USD Falls Against GBP, EUR Ahead of Busy Economic Data
The US dollar (USD) fell against its major trading partners GDP, EUR, and JPY before another busy day of economic data releases and appearances by Federal Reserve officials. The dollar has continued to lose ground since the US border deal with Mexico and Canada was agreed on Monday.
The focus is now on China, and a relatively measured response by Beijing to Trump’s tariffs is keeping markets optimistic that some deal can be struck before China’s retaliatory tariffs kick.
“We note that AUD/USD—a key proxy for China sentiment—has entirely erased its short-term risk premium (i.e. undervaluation)”, ING analyst Francesco Pesole said in a note. A consensus US-China deal does seem the most likely scenario, but analysts sense markets are underpricing the risk of a more prolonged trade spat.
“Tariffs on China aren’t as impactful on US consumers/producers as those on Canada and Mexico, and that allows Trump to take his time to discuss a deal,” ING said. Trump has indicated he is in no rush to speak to China’s President Xi Jinping.
ADP’s private payroll data for January are scheduled to be released followed by international trade data for December and the Treasury’s quarterly refunding.
Weekly Energy Information Administration (EIA) crude oil stocks inventory data are scheduled to be released Wednesday and the Atlanta Fed is expected to update its Q1 gross domestic product Nowcast estimate around midday.
Earlier Wednesday, the Mortgage Bankers Association said mortgage rates fell to a six-week low in the week ended Jan. 31, lifting refinancing applications. However, purchase activity declined in the week due to rising home prices.
A quick summary of foreign exchange activity heading into Wednesday showed that USDEUR rose to 1.0415 from 1.0386 at the Tuesday US close and 1.0327 at the same time Tuesday morning.
The Eurozone services purchasing managers’ index fell slightly in January but remained above the breakeven point, while producer prices rose less than expected in December, according to data released earlier Wednesday. European Central Bank policy board member Philip Lane is expected to speak ahead of the meeting scheduled for March 5-6.
GBPUSD rose to 1.2535 from 1.2489 at the Tuesday US close and 1.2416 at the same time Tuesday morning. UK services PMI declined in January, now indicating slightly more modest growth in the sector, data released overnight showed.
The next Bank of England meeting is scheduled for Thursday, when the BoE is expected to lower its target rate by 25 basis points.
USDJPY fell to 152.8759 from 154.2649 at the Tuesday US close and 155.3246 at the same time Tuesday morning. Japanese services PMI rose more than expected in January to indicate faster expansion while wage growth accelerated in December, according to data released overnight. The next Bank of Japan meeting is scheduled for March 18-19.
USDCAD fell to 1.4290 from 1.4317 at the Tuesday US close and 1.4440 at the same time Tuesday morning. The Canadian trade balance for December is due to be released. The next Bank of Canada meeting is scheduled for March 12. Ministry Seeks $2 billion Fibre Optics Funding
