Ivan Delgado
Independent Analyst
Main topics for Wed
USD trades broadly higher as tax reform optimism maintained, coupled with US producer prices at the highest levels in over 6 years.
The clock is ticking for the FOMC meeting, with expectations set for a rate hike in what would represent the latest press conference by Fed Chair Janet Yellen.
The latest beat in US PPI has some analysts looking for an upgrade of the guidance for 2018, now making calls of four rate hikes vs current three.
Ahead of the FOMC, the UK is set to publish its latest labour market report, with expectations set for an upward pressure in wages but an increase in jobless claims.
Following the surprising rise in US PPI, the market has upgraded its estimates for Wed's US CPI figures, due in early NY, which should underpin the buying interest in the buck.
A look at Forex majors
EUR/USD printed a bearish outside day after another failure at 1.18. Ahead of the FOMC, backed up by positive fundamentals, the USD appears to have the momentum to attack the 1.17 round number.
GBP/USD keeps trading lower amid broad-based USD strength, with a key level of support at 1.33 being tested. A bearish continuation may be on the cards judging by the collapse in the UK vs US 10y yield spread.
USD/JPY is struggling to break through a major point of control around the 114.00, where offers keep absorbing the bids. The intrinsic valuations are fairly supportive (US stocks + US vs JP yield spread) but the flattening of the curve + decreasing vol should be concerning.
AUD/USD has defied the strength of the US Dollar as a buying campaign off 0.75 was initiated, see within the context of a bearish trend. The area of resistance circa 0.7570-7600 is now key, with the AU vs US 10y yield spread not backing further rises.
What happened?
US Nov PPI final demand YoY came at 3.1% vs 2.9% exp and 2.8% prev, with the montly reading at 0.4% vs 0.3% exp and 0.4% prev.
US Nov NFIB business optimism index printed 107.50 vs 103.80 prev.
US w/e Redbook MoM came at -0.7% vs -0.9% prev., while the yearly reading stood at 3.3% vs 3.0% prev.
US Sec Cornyn said that the GOP is very close to unveiling a tax deal
Bitcoin settles circa 18,000 in CBOE Jan contract with volumes dropping as investors in wait-and-see to get familiar with trading conditions.
EU, US, Japan prepare to take action against WTO countries flooding global markets, Reuters reported.
EU warns UK on Brexit reneging in 'furious race against time', Reuters reported.
A second letter was sent to the US Treasury Secretary by EU officials over the ongooign US tax reform as concerns grow.
UK Brexit sec. Davis finds consensus with EU's verhofstadt over the recently agreed Brexit divore bill.
UK inflation broke past the 3% mark.
Upcoming events
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