Mar 19, 2019 – Tuesday

1) Australian Dollar Ticks Up, RBA Minutes No More Dovish Than Usual
2) US Dollar Steadies Ahead of Fed Meeting as US Treasury Rates Rebound
3) US Stocks Soar Ahead of Fed Policy Meeting
4) EUR/GBP: 0.8470 Becomes Bears’ Favorite, EU/UK Data in Spotlight

1) Australian Dollar Ticks Up, RBA Minutes No More Dovish Than Usual

The Australian Dollar was steady following the release of monetary policy meeting minutes from the Reserve Bank of Australia which, while hardly joyful, were no gloomier than recent former editions.

The minutes referred to the March 5 monetary policy decision, which was to leave the key Official Cash Rate on hold at the 1.5% record low in place since August 2016. It is the longest unchanged rate in Australian history.

The minutes noted ‘significant uncertainties’ in the economic outlook, with scenarios in which rates might be raised or cut both foreseeable. This is in marked contrast to the RBA’s stance in 2018. Back then it said that a rate rise was by far the most likely next move, even if it didn’t come soon. However markets have had some time to get used to this change of rhetorical tack. The RBA first admitted that a cut was possible back in early February.

AUD/USD had trickled down in the run-up to the release, with some investors perhaps placing modest bets on more dovish commentary from the central bank (not usually a bad bet). As it was the text saw very little change of message, if any, from the previous month’s and the Aussie crept back up again.

However, this renewed US Dollar bearishness has not been enough to break the Aussie’s overall downward impetus. Domestic inflation remains stubbornly low and Australian rate-futures markets continue to price in cuts. While this continues to be the case, the Australian Dollar will probably continue to lose ground.

However it could get a fillip if any durable trade settlement between the US and China is signed in the weeks ahead, and headlines around this are moderately encouraging at present. Australia has strong links with both global titans and has arguably the strongest interest in a deal of any third country.

2) US Dollar Steadies Ahead of Fed Meeting as US Treasury Rates Rebound

The US Dollar (via the DXY Index) gaped to open higher at the start of the week but closed Monday essentially unchanged from its Friday close, highlighting the state of patience pervading global markets ahead of key events this week. With the latest Brexit news suggesting that UK PM Theresa May won’t be able to see her Withdrawal Agreement go up for a third vote, traders are proving cautious as the March 29 deadline approaches.

Meanwhile, the US-China trade war appears to be ready to continue for a few more weeks, even if the period of detente persists with the 25% tariffs on $200 billion of imported Chinese goods on hold for the time being.

But with reports from the South China Morning Post over the weekend suggesting that the summit between US President Donald Trump and Chinese President Xi Jingping won’t be held until at least June, there exists the distinct possibility that market sentiment sours over the coming sessions.

A summit between the two leaders is (apparently) a necessary precursor to any deal being signed, so traders should keep an eye out for any concrete evidence that it has indeed been pushed back from the assumed late-April date.

The Federal Reserve’s March policy meeting is very unlikely to bring any change in the rate forecast, even if the Summary of Economic Projections produces lower growth and inflation forecasts. But it seems unlikely that the FOMC would want to write off the odds of a rate hike in 2019 altogether, given that the unemployment rate is near 50-year lows and wage growth is at its highest level in a decade.

Accordingly, Fed Chair Jerome Powell has a balancing act on Wednesday: continue to talk in enough dovish tones to keep equity markets supported while not closing off the possibility of one more rate hike before the cycle is truly compete. As such, if the next few sessions leading into the Fed meeting on Wednesday are quieter (beyond isolated pockets of event risk or news flow), don’t be surprised.

Ahead of the Fed meeting this week, the DXY Index’s forecast is still neutral. With US Treasury yields holding ground at the start of the week, the DXY Index has changed little in recent days. Price remains within an ascending triangle in place since November. It still holds that, with US Treasury yields having turned lower, the US Dollar is seeing its carry trade appeal deteriorate.

3) US Stocks Soar Ahead of Fed Policy Meeting

US stocks surged because dives in Boeing and Facebook held profits in check and traders closely watched this week’s Fed gathering for affirmation of the major financial institution’s commitment to patient monetary stance.

The S&P 500 stood nearly 3.4% below its all-time maximum recorded in September. Eventually, all three key American indexes found themselves in positive territory.

The Dow’s nominal rally advance was hampered by Boeing Co that tumbled by 2% because the company faced soaring scrutiny as for safety of its 737 MAX planes after a fatal crash on March 10 in Ethiopia. The world’s number one air plane maker extended the previous week’s 10.3% slump becoming the heaviest weight on the blue-chip index.

The Fed’s two-day policy gathering burst out on Tuesday. Market participants expect the major US financial institution.

Brexit assisted to curb investor optimism because the UK’s speaker of Parliament stressed that Prime Minister Theresa May’s proposal wouldn’t be put to a vote unless it wasn’t radically revised.

As a matter of fact, the Dow Jones Industrial Average rallied by 0.12% hitting 25,880.66. As for the S&P 500, it surged by 0.29% reaching 2,830.65, while the Nasdaq Composite surged by 0.28% ending up with 7,709.98.

Of the 11 key sectors in the S&P 500, 6 found themselves in the black, with financials and energy reporting the most impressive percentage gains.

4) EUR/GBP: 0.8470 Becomes Bears’ Favorite, EU/UK Data in Spotlight

EUR/GBP struggles around the intra-day low of 0.8540 during early Tuesday. The pair takes the support of Brexit optimism in order to counter the lack of big data from the EU. Next up in the trader’s radar will be the EU and German ZEW economic sentiment survey results coupled with the UK employment data.

Buying bets were in favor on Monday as upbeat EU trade balance figures confronted report that the UK PM Theresa May’s third Brexit proposal wasn’t entertained for Tuesday’s meaningful vote. With this, pushing Mrs. May now has to attend the EU summit with empty hands and a request for March 29 Brexit deadline extension.

Moving forward, investors may now concentrate on the British employment data up for 09:30 GMT ahead of the EU and German sentiment indices scheduled for release at 10:00 GMT.

The January month average earnings are expected to soften to 3.2% from 3.4% whereas average earnings excluding bonus may remain unchanged at 3.4%. Also, the unemployment rate could reprint 4.0% figure during the first month of 2019 while claimant count change might soften to 3.7K from 14.2K.

Elsewhere, German ZEW economic sentiment for March could improve to -11.3 from -13.4 but its EU counterpart is less likely to please the EUR buyers if matching -18.7 forecast versus -16.6 prior.

Not only two-month-old descending trend-line, at 0.8640 now, but the immediate resistance-line figure of 0.8590 also challenges the EUR/GBP pair’s upside.

As a result, chances of its pullback to the 0.8500 round-figure and then to current month low around 0.8470 can’t be denied. During the pair’s additional weakness under 0.8470, 61.8% Fibonacci expansion of its latest moves near 0.8425 can becomes bears’ favorite.

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