Market Drivers March 13, 2018
Europe and Asia
No Data
North America
7:30: GBP Annual Release
8:30: USD CPI
Boosted by better risk aversion flows, USD/JPY was the clear winner of the night in Asian and early European trade as it popped for more than 88 pips of the open hitting three-week highs.
The pair was aided by better bid in S&P futures, but as we’ve noted earlier, the dollar has been due for a rally this week as a variety of factors aligned its way. With the Fed decidedly more hawkish, US job growth accelerating, US tariff threats dissipating and the prospect of a North Korea detente, the economic and political backdrops have improved considerably over the past week and it was just a matter of time before sentiment started to catch up.
Yesterday the pair was knocked sideways by reports of a possible political scandal in the Abe administration, but it appears now that the damage will be contained and the market has moved on.
In today’s action, all eyes will be on US CPI data which is projected to decline to 0.2% from 0.3% on a core basis. Although price pressures remain muted, a weaker reading is unlikely to derail the USD/JPY rally unless it prints near the 0.0% level. The Fed appears to be determined to normalize policy even in the absence of inflation threat as it is far more concerned about ending QE after nearly a decade of extraordinary measures.
Any upside surprise, however, would only contribute to the USD/JPY rally and if the pair can clear the 107.50 level as the day proceeds the longs will set their sights on the key 108.00 barrier which has not been touched in a month.