Forex today: FOMC minutes overshadowed by geopolitical angst

Forex today was dominated by geopolitical headlines where a thwarted missile attack in Riyadh, Saudi Arabia, and U.S. President Donald Trump’s threats to launch missiles at Syria drove investors into gold, the yen and a late exit out of stocks as well. 

Indeed, just as Trump makes friends again with one world leader, Xi, he takes up his place in Syria where the markets are now focussed and butts heads with Russian leaders. 

As a result of the mixed geopolitical outlook, the USD was also mixed. Late in the day, it was evident that the attack was not seen as imminent and the dollar recovered some lost ground through 89.60 within a range of between 89.355 - 89.670. The US 10yr treasury yield initially fell from 2.80% to 2.76% on the Russian news before dropping back to 2.78%. 

The focus was set to the FOMC minutes momentarily as well, which were taken as slightly more hawkish but the Fed fund futures yields were hardly changed, pricing the chance of the next rate hike in June around 85%. The dollar did catch a bid on the back of the minutes, but only temporarily as investor's concerned stayed with geopolitics. As for data, the US CPI was mostly in line.

As for other currencies, the single unit catches a bid on the Russian fall out, climbing from 1.2360 to 1.2396. The pair then dropped to 1.2347 on the FOMC minutes and suffered from offers in the yen cross as well. However, there was a late bounce in the NY shift to a close of around 1.2360 as the dollar buckles at its daily highs. 

GBP/USD was holding onto early gains in European trade when the pair was taken up through stop territory onto the 1.42 handle but succumbed to pressures and dropped back down to the 1.4060 level, on the back of the FOMC minutes. Sterling then recovered back to 1.4180 for the close having traded in the NY range of 1.4221-1.4162. The BoE expectations are keeping the pound a buy on dips. 

EUR/GBP was ending the NY session at 0.8722 and higher by +0.04% having traded within a range of between 0.8740-0.8709. Weak UK data was supporting the bid with the UK manufacturing disappointing, way off the mark, ( Feb Manufacturing Output MM, -0.2%, 0.2%).

USD/JPY was in a European range of between 107.25-106.90 range but then slipped towards the 106.62 Mon-Tues lows on the Syrian angst. The FOMC gave the pair a needed boost and Geopolitical fears receded later in the day, leaving the pair around the 106.80 level for the close and Asian handover. 

As for the antipodeans, the Kiwi was starting out the day at 0.7365, in a tight range early on after a strong performance this week on risk off trade. The bird caught a bid on commodities bouncing and yen weakness and neared 0.7380 but lost its perch on a comeback in the dollar after the FOCM minutes. NZD/USD was pushed back to 0.7355 for the close. Much the same can be said for the Aussie. AUD/USD opened around in a bullish chop and AUD/JPY jumping in a risk-on session. AUD/USD reached as high as 0.7772 early but then fell back to 0.7744 on the fade and FOMC minutes nailing in the nail while commodities slipped back.

Key notes from US session:

Fundamental wrap: the drums of war, Russia/Trump/Syria, keep investors on their toes

Key events ahead:

Analysts at Westpac noted the key events coming up as follows:

"Australia Feb housing finance data is due at 11:30am/9:30am Sing/HK. Westpac looks for a -1% dip in total loans, consensus is -0.4%. There is limited scope for a surprise because banking industry data is already available. The big picture is a modest slowdown in lending since Q3 2017."

"Asia’s calendar is quite busy. The Bank of Korea is fully expected to keep its benchmark rate at 1.5% but the commentary will be watched. Singapore releases Feb retail sales, which could help shape estimates for Q1 GDP due tomorrow (along with the MAS policy review). India releases data on Mar CPI and Feb industrial production." 

"Eurozone Feb industrial production is due in the London morning. The US data calendar is low key – weekly jobless claims and Mar export and import prices."