FTSE -5 points at 7185
DAX -11 points at 11575
CAC +1 points at 4904
Euro Stoxx flat at 3317
The Federal Reserve’s (Fed) December meeting minutes revealed two main concerns: a faster growth due to a large fiscal stimulus under the new US President Donald Trump’s rule and a stronger US dollar, which could weigh on inflation.
The Fed members readjusted their expectations on the upside, highlighting accrued risks for growth and inflation. Policymakers agreed to continue monitoring the economic data and global financial developments. As a reminder, the Fed is expected to hike rates three times in 2017, compared to two anticipated prior to Trump’s victory
The ADP employment report is due today. The US economy is expected to have added 171'000 new private jobs in December versus 216'000 a month earlier. Soft data could further dent the short-term US dollar appetite.
The US dollar sold-off against the G10 and the emerging market currencies, as the US 10-year yields dipped toward 2.40% for the first time in a month. Though the Fed’s stance was hawkish as expected, the market bought the decision and sold the minutes. Beyond the first market reaction, the 2017 outlook remains positive for the US dollar and the yields. As it appears, the Fed’s monetary policy will diverge from the rest of the world and the hawkish Fed divergence will certainly be supportive of further appreciation in the greenback.
Back to the short-term, the yen (+1.31%) gained the most against the US dollar in Tokyo. The USD/JPY spiked down to 115.65 and pulled the Nikkei 0.37% lower. Topix (+0.08%) remained flat. The key short-term support stands at 115.00/114.57 (psychological level / minor 23.6% retracement on Nov 9th to Dec 14th rise).
The EUR/USD rallied on stops after breaking above the 1.0500 level. The pair is testing 1.0568 (minor 23.6% retracement on Nov 9th US election to Jan 2nd decline), if surpassed, could encourage a further short-term correction. The key resistances are eyed at 1.0605 (50-day moving average), 1.0652 (Dec 29th algo rally top), before the critical 1.0707 (major 38.2% retrace). Macro traders remain seller on rallies.
The GBP/USD cleared 1.2300 offers and extended gains to 1.2356. The UK's services PMI is due today and the consensus suggests that the December print may have softened to 54.7 from 55.2 a month earlier. Any positive surprise should be supportive of a further rise toward 1.2445 (50-day moving average) and 1.2575 (100-day moving average & minor 23.6% retracement on Jun 23th to Oct 7th fall). Support is eyed at 1.2200.
Oil and commodities firmed. Gold advanced to a four week high and is currently testing the key resistance at $1175 (major 61.8% retracement on Dec’15 to Jul’16 rise). Surpassing this level could suggest a mid-term bullish reversal and hint at a further rise toward the $1200.
US and European equity futures were mixed. FTSE futures (+0.08%) traded marginally in the green, as copper futures rose 0.68%. The Euro Stoxx futures retreated by 0.06% on stronger euro.
European markets are set for a mixed open. FTSE is called 5 points softer at 7185p at the open.