Dollar weakens broadly after FOMC minutes: Aug 18, 2016

Market Review - 17/08/2016 23:03GMT 

Dollar weakens broadly after FOMC minutes

The greenback fell broadly after release of minutes from the Fed's July policy meeting on Wednesday as it showed a general agreement that more data is needed before such a move.

Versus the Japanese yen, dollar found support at 100.17 just ahead of Asian open and surged to 101.17 in Asian midday after on more verbal currency warning by MoF, however, intra-day cross-buying in yen versus other major currencies knocked price down to 100.64 in Europe and then 100.16 in New York morning. Later, price briefly jumped to 100.66 at the release of FOMC minutes but swiftly fell to a fresh session low of 100.04 in New York afternoon.

Japan MoF Asakawa said on Wednesday, 'will respond to FX market if there are excessive moves; exchanging views with G7 partners on FX; closely monitoring market moves.'

FOMC minutes showed, 'voting members at Fed July meeting agreed more data needed before raising rates; some fed voting members at July meeting thought rate hike would be needed soon; several voting members said future slowdown in job gains would argue against near-term hike; a couple of voting members wanted more evidence inflation would rise to target before rate hike; most voting members said quick recovery in financial markets after Brexit vote reduced uncertainty; several policymakers concerned low rates could have negative impact on financial stability.'

Although the single currency came under renewed selling pressure after a brief rise to 1.1290 in Asia and later tanked to 1.1256 and then 1.1254 in European morning, price staged a bounce to 1.1280 at New York open due partly to cross-buying in euro vs other major currencies n then moved sideways in subdued NY morning. Later, price briefly retreated to 1.1242 but swiftly rallied to a fresh session high of 1.1316 following the release of FOMC minutes in New York afternoon.

Cable swung wildly in hectic European morning after a cross-inspired rally to 1.3073 in Australia on Wednesday, however, lack of follow-through buying led to intra-day retreat. Despite a brief bounce to 1.3060 after mildly upbeat U.K. jobs report, sellers emerged and knocked price to intra-day to 1.2996, then 1.2995 in subdued New York morning. Later, price briefly retreated to 1.2979 but swiftly rallied to a fresh session high of 1.3087 following the release of FOMC minutes in New York afternoon.

The U.K. Office for National Statistics said the unemployment rate remained at 4.9% in the three months to June, in line with forecasts. Separately, the claimant count fell by 8,600 in July, compared to expectations for a increase of 9,500 people, and following an advance of 900 a month earlier. Meanwhile, the average earnings index, including bonuses, rose by 2.4% in the three months to June, in line with forecasts and after increasing by 2.3% in the three months to May. Excluding bonuses, wages rose by 2.3%, also in line with the consensus estimate and following a 2.2% increase in the three months to May.

In other news, St. Louis Fed's Bullard said, 'sticks with call for single rate hike for foreseeable future, given low-growth, low-inflation "regime"; risks may be to upside but still regards steady target rate of 63 bps as appropriate until conditions change.' Later, he added after the release of FOMC minutes, 'does not feel needs to put much weight on Sept or later this year for next rate increase given his outlook that only a single hike is necessary; would prefer to move on good news, prefer signs of higher GDP growth before moving.'

Data to be released on Thursday:

Japan exports, imports, trade balance, Australia employment change, unemployment rate, participation rate, France unemployment rate, Eurozone current account, CPI, U.K. retail sales, U.S. initial jobless claims, Philadelphia Fed business index and leading index change.