• The Fed keeps it close to the cuff
  • Pressure on the pound
  • USD facing broad weakness
  • Aussies see the largest trade surplus on record

The dollar remains lackluster after the FOMC meeting yesterday, which markets brushed off as a non-event. The Fed kept it close to the cuff as they continue to weigh the risks ahead of the US economy. This was a disappointment for investors who are desperate for some stability amid myriad political uncertainty that is weighing on the USD. Currently, the market is pricing in just two rate hikes in 2017 – one in June and one in December – but if we start to see developments from the Trump administration on the fiscal policy front, this could prompt the Fed to raise their outlook which would boost the dollar in the medium-term.

The dollar remains weak across the most currencies, notably excluding GBP. “Super Thursday” has been anything but super for sterling after the Bank of England took the silver lining investors wanted and turned over a looming storm cloud instead.

The Bank of England left interest rates unchanged in their January meeting, revising their growth forecasts higher while lowering their inflation projections. Inflation has been on a steady climb since June, but the bank’s downgraded forecasts indicate that they see the recent uptick as a temporary reaction to the changes brought about by Brexit. This did little to satisfy investors who were looking for a more hawkish report, and the pound has sold off steadily since the news broke.

The Aussie dollar is by far one of the best-performing currencies this morning. Propelled by the largest trade surplus on record, AUD has gained across the morning, gaining more than a cent against the USD. The yen continues to climb as US political risks continue to play out in financial markets. A really strong jobs report on Friday could reverse the trend, but current sentiment sits squarely opposite to risk appetite which should continue to fuel a resilient yen.

EURUSD:   Euro is higher as political risk continues to weigh on the USD.

GBPUSD:  Sterling weaker after the Bank of England forecasts raise concerns that Brexit effects will be a longer-term detriment to inflation.

AUDUSD: Aussie dollar is markedly higher and continues to gain after a record high trade surplus.

JPYUSD: Dollar/yen is lower as investors continue to weigh political risks.

USDCAD: Canadian dollar is mixed against the USD and gave up overnight gains as the US markets opened.