USD: Focus on the Fed
The Fed will take the cake this week amid the various data points and central bank meetings that we’re looking forward to. After Friday’s payroll report surprised to the upside, markets have already priced in a 0.25% rate increase in Wednesday’s meeting, making it practically impossible for the Fed not to oblige.
With this in mind, the focus sits with the meeting minutes and Janet Yellen’s subsequent press conference. Our main questions heading into the meeting: Has the Fed raised forecasts for the economic outlook? Are there calls for more than three hikes this year? Will Yellen keep a hawkish tone in her first press conference of 2017? All this and more on Wednesday, March 15.
EUR: Dutch elections are getting dicey
Heading to the polls on Wednesday, March 15, the people of the Netherlands will cast their votes and elect a new prime minister. A political standoff between Turkey and the Netherlands has injected renewed vigor into the Dutch elections. After rescinding landing rights for the Turkish Foreign Minister who was set to speak at a rally, the two governments are busy slinging mud at one another. Turkish president Erdoğan said that the Dutch government were acting like “Nazi remnants”. Prime Minister Rutte said that the comments were “way out of line” and the leader of the anti-Islam Freedom Party Geert Wilders called Erdogan a “dictator.” Wilders has much to gain from escalating tensions with Turkey as his could push more voters towards his populist, anti-Islam sentiments. The Dutch elections have been heralded as a Bellwether to European Populism as Wilders’ campaign characterizes many of the concerns driving the populist move in Europe.
GBP: Don’t stop me now
Sterling is off to a strong start this week as investors anticipate Parliament to sign off on Theresa May’s Brexit Bill in a vote on Monday night.
Who’s not keen on the break up? Scotland. Scottish First Minister Nicola Sturgeon has called for a second referendum on Scottish independence from the UK. Sturgeon has been vying for this move since Brexit was confirmed as a large majority of Scots voted to remain in the European Union. Such a move would have to go through with a majority vote in Scottish Parliament, but ultimately Theresa May would need to sign off on it which may be why the event has largely been ignored in currency markets.
CAD: Decoupling from oil?
After a 9.1% slide in WTI crude oil last week, prices have seemingly settled below $49 / barrel. Production cuts that the OPEC deal negotiated to curb the global supply glut left a hole in the market that US producers were keen to fill. US drillers boosted their rig count to the highest levels in more than a year, but it has had little effect on USD/CAD which may indicate that the Canadian dollar will be governed more so on domestic fundamentals and not it’s correlation with oil.
JPY: Of banks, G20, and trade
Last week was a mixed bag for JPY, and the yen hasn’t exhibited much momentum in either direction this morning. While investors don’t expect the Bank of Japan to alter policy in their meeting Thursday, Governor Haruhiko Kuroda’s press conference will be watched.
The G20 meeting on Friday will be important for the yen as global protectionism holds a lot of import for Japan’s export-based economy.
AUD: Don’t rock the boat
Firmer copper prices are supporting the Aussie dollar as we kick off a quiet week for Australian data. The main item to look for on the domestic front is jobs data Thursday, outside of this AUD/USD looks more likely to trade on US developments.