Major currency pairs traded mostly sideways in the past few sessions as market watchers are gearing up for the FOMC statement. An interest rate hike is widely expected but changes in the dot plot forecasts and economic projections could have a bigger impact on dollar movement, both in the short-term and long-term. Traders are also on the lookout for how the US central bank plans to adjust to the Trump administration’s fiscal policy plans.
EUR/USD is moving around the 1.0635 area, USD/JPY is cruising around 115.20, USD/CHF is holding steady at 1.0115, AUD/USD is staying above the .7500 handle, NZD/USD is at .7215, and USD/CAD is testing the long-term area of interest at 1.3150.
US retail sales and PPI numbers are also due, possibly setting the tone for market sentiment ahead of the actual Fed announcement. Headline retail sales could show a 0.3% uptick while core retail sales could see a 0.4% gain. Headline PPI might print a 0.1% increase while the core version of the report is slated to show a 0.2% rise in producer prices.
UK CPI impresses, jobs data next
Sterling got a small boost after the November inflation reports came in mostly stronger than expected. Headline CPI rose from 0.9% to 1.2%, higher than the consensus at 1.1%, while core CPI advanced from 1.2% to 1.4% versus the 1.3% estimate. RPI also beat expectations with a 2.2% gain while PPI input and output prices fell short. HPI posted a 6.9% gain in house prices versus the estimated 7.3% jump.
GBP/USD popped up to 1.2728 then retreated back to 1.2660, GBP/JPY climbed up to 146.55 then pulled back to 145.75, EUR/GBP found support at .8340, GBP/AUD is testing 1.6900 once more, GBP/NZD fell back to 1.7550, and GBP/CAD is still down to 1.6625.
UK claimant count change data is due next and a 6.9K rise in joblessness is eyed. This might be enough to keep the unemployment rate steady at its 11-year low of 4.8% while the average earnings index is expected to stay unchanged at 2.3% as well. BOE Governor Carney has a testimony scheduled so this should provide traders some clues on how the central bank statement might turn out later this week.
Risk appetite seems to be in play for now, as US equities closed in the green and commodities are holding on to their gains. US crude oil inventories data is also due and a draw in stockpiles could boost crude oil further.