USD Catches a Mild Bid

Market Drivers May 24, 2017
Moody’s downgrades China
ECB Constancio mildly bullish
Nikkei 0.66% Dax -0.21%
Oil $51/bbl
Gold $1252/oz.

Europe and Asia:
NZD Trade Balance 572M vs. 268M

North America:
USD Existing Home Sales 10:00
CAD BOC Rate Decision 10:00
USD FOMC Minutes 14:30

It’s been a quiet night of trade in the FX market with little newsflow to move prices as most the major remained with 25 pip ranges through Asian and early European trade. The only major headline to move markets was the downgrade of China debt by Moody’s – the first such move since 1989.

Moody’s downgraded Chinese debt from A1 to AA3 noting that it expects the country’s debt situation to deteriorate over the coming years as slowdown in growth and and continued expansion of debt impact the market. The rating service however added that the outlook was stable with risk broadly balanced.

The news hit AUDUSD hard with the pair dropping below the .7450 level, but it soon recouped its losses and was trading unchanged on the day. The Moody’s assessment appears to have had little lasting impact on the market as FX traders chalked up the news to longer term trends that had no effect on day to day trade.

Elsewhere in Asia the New Zealand Trade Balance beat its forecast coming in at 578M versus 267M and Fonterra raised its forecast for 2016/2017 by 15 cents helping to underpin the kiwi which remained above the .7000 figure for the day.

Generally, the market remains in a lull with the anti-dollar move taking a breather after torrid gains last week. Today’s North American trade will see the Existing Homes Sales data as well the BOC rate announcement which is expected to keep policy unchanged. Later in the afternoon, traders will get a look at the FOMC minutes which could provide a further boost to the greenback if they maintain the Fed’s hawkish tone. USDJPY has made a few forays into the 112.00 figure but has been rejected so far. If the FOMC minutes indicate that Fed is on path for 3 hikes this year, the 112.00 figure should fall by the wayside as the day proceeds.