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Geopolitical Risk Takes Over Trade Jitters to Direct the Markets

Bob Mason
Even a hawkish set of FOMC meeting minutes and a jump in baseline inflation failed to spur the Dollar into action, with geopolitical tension on the rise as Trump looks set to launch missiles on Syria.

Earlier in the Day:

Economic data released through the Asian session this morning was limited to March retail credit card transactions out of New Zealand and February new home loan figures out of Australia.

For the Kiwi Dollar, retail credit card transactions jumped 1%, coming in ahead of a forecasted 0.5%, following February’s revised 0.2% decline.

The increase in March was attributed to a surge in spending on groceries and liquor, with spending on consumables rising by a record NZ$57bn (+2.9%), to more than reverse February’s 0.7% fall.

According to Stats Government NZ, spending increased in 3 of the 6 industries, with spending on durables rising by NZ$15m (+1.2%) and by NZ$14m (+1.4%) on hospitality including accommodation, bars, cafes and restaurants.

The Kiwi Dollar moved from $0.73602 to $0.7361 upon release of the figures, with the Kiwi Dollar sitting at $0.7361 at the time of writing.

For the Aussie Dollar, home loans fell by 0.2% in February, which was better than a forecasted 0.3% decline, following January’s revised 1% fall.

The Aussie Dollar moved from $0.77635 to $0.77624 upon release of the figures, the stats having a relatively muted impact on the Aussie Dollar through the session, before easing to $0.7750 at the time of writing, down 0.06% for the session.

Elsewhere, the Japanese Yen was down 0.11% to ¥106.91 at the time of writing,

In the equity markets, the Nikkei and ASX200 were down 0.18% and 0.27% respectively ahead of the close, while the Hang Seng and CSI300 were down 0.23% and 0.67% respectively as the markets responded to the threat of a missile strike on Syria and possible noise from Iran and Russia in response, a more hawkish than expected set of FOMC meeting minutes and lingering concerns of a U.S trade war with China.

The Day Ahead:

For the EUR, it’s a busy day ahead, following a quiet first half of the week, with economic data out of the Eurozone including finalized March inflation figures out of France, the Eurozone’s February industrial production figures and the release of the ECB’s monetary policy meeting minutes.

While we will expect the markets to be holding out for the ECB minutes release, any chatter of a shift in policy on deposit and interest rates a positive for the EUR, industrial production figures may provide some short-term moves, with the slide in German production likely to weigh.

The Eurozone has entered a soft patch and, while Draghi has showed little concern, failure to shift up a gear in the 2nd quarter may temper market expectations of a more hawkish ECB.

At the time of writing, the EUR was down 0.04% to $1.2362, with today’s stats, geo-political tensions and the Oval Office there for the markets to consider.

For the Pound, there no material stats scheduled for release this morning, leaving the Pound in the hands of BoE Monetary Policy Committee member Haldane, who could provide some direction should there be any policy chatter, recent economic data out of the UK having been on the softer side, which could give the BoE reason to pause next month.

At the time of writing, the Pound was flat at $1.4177, weak manufacturing and industrial production figures released on Wednesday doing the damage.

Across the Pond, economic data out of the U.S includes the weekly jobless claims figures, together with March’s import and export price index numbers that could provide further evidence of inflationary pressures building, though the moves in the Dollar through the day will be more hinged on the geo-political risks that are circling overhead.

At the time of writing, the Dollar Spot Index was down 0.02% to 89.552, with any missile launch on Syria the negative for the Dollar, a possible conflict overshadowing the FOMC meeting minutes that suggested the need for a more aggressive path to policy normalization.

Across the border, economic data out of Canada is limited to February’s new housing price index numbers that are unlikely to provide too much direction this afternoon, the Loonie’s run continuing, with rising tensions in the Middle East and a jump in oil prices providing additional upside.

At the time of writing, the Loonie was flat at C$1.2589 against the U.S Dollar.

This article was originally posted on FX Empire