President Trump’s State of the Union address last night wasn’t able to pump much life into the U.S. dollar, and the focus quickly shifted ahead to the Federal Reserve’s monetary announcement Wednesday afternoon.
Dollar dips on lack of details
During his speech, Trump touted his administration’s success and called for a $1.5 trillion infrastructure plan to fix the country’s bridges and roadways. Mention of the plan momentarily lifted the dollar during the Asian session, but a lack of details on U.S. policy led us back to a weaker dollar.
This morning, the dollar is trading down against the euro and flat against the pound. EUR/USD is trading around 1.245 on the Eurozone’s economic data and strong German numbers. U.S. Treasury yields also stabilized at 2.7%. We’ll see if the pair breaks through 1.25, despite better-than-expected unemployment data from ADP this morning, saying the U.S. added 234,000 private sector jobs in January.
Janet Yellen will deliver her last interest rate decision as leader of the Federal Reserve this afternoon, but most analysts aren’t expecting a change in the rate. They’ll be closely reading the Fed’s statement for any signs of hawkish language. New Chairman Jerome Powell takes over Feb. 3 and a majority of investors guess he will hike rates during the next Fed meeting in March.
Sterling still strong
GBP/USD is trading relatively flat as Brexit-related economic worries and a weak dollar keep the pair hovering below the 1.42 mark.
While there is uncertainty surrounding the U.K. economy as a whole, bulls continue to push the sterling higher. Prime Minister Theresa May, who is in China to talk trade, addressed critics today saying she is “not a quitter” and insisted her administration has been bold in making economic progress.
Bank of Japan speaks up
The Bank of Japan increased the amount of bonds it will buy at its regular monthly operations, weakening the yen and bringing down yields. The decision confirmed the bank’s loose monetary policy.
The USD/JPY pair is trading flat below 109 with U.S. ADP data this morning having little impact. The Chicago PMI and Pending Home Sales data reports out this morning could cause the pair to fluctuate, but the big headline on the economic front is still the Fed’s announcement later today.