Forex news for NY trading on March 20, 2019
- What's priced in for the Federal Reserve now
- EURUSD may have cause for pause (but hard to stop a freight train).
- Powell Q&A: Balance sheet changes aren't related to monetary policy
- Powell: US economy is in a good place, goal is to sustain expansion
- Watch live: Powell's press conference
- US 10-year yield threatens the Jan low and yield curve inversion
- US dollar sinks with dot plot showing no hikes this year, one in 2020
- FOMC dot plot shows no hikes in 2019. One hike in 2020
- Federal Reserve cuts 2019 GDP forecast to 2.1% vs 2.3% in December
- The full statement from the FOMC for March 2019
- Federal Reserve leaves rates unchanged, as expected
- Ireland's Varadkar: Backstop, withdrawal agreement can't be changed
- European shares in the session lower. German DAX has its worst day since February 7
- Pres Trump: We are talking about leaving tariffs on China for a long period of time
- EU's Tusk: Have discussed extension. Short extension would be possible
- The rumors continue to swirl around Theresa May's future
- EU official says May's Article 50 extension request came too late to make decision Thurs
- US weekly oil inventories -9589K vs +1750K expected
- French foreign min: If May cannot offer guarantees Brexit deal will be passed, extension to be turned down
- May spokesman: Wants to bring 3rd meaningful vote as soon as possible
- Juncker warned May against extension beyond May 23. Cable falls further
- The AUD is the strongest and the GBP is the weakest as NA traders enter
- ForexLive European morning FX news wrap: Sterling slips as May seeks short Brexit extension
In other markets near the end of the day:
- Spot gold is up $7.40 or 0.57% on at $1314.06 on the fall in the USD
- WTI crude oil settled at $59.83 up $0.80 or 1.36%. In addition to the lower dollar, the inventory data today showed a sharp drawdown in inventories
The FOMC decision was more dovish
- They cut the estimate for hikes from 2 to 0 in 2019
- And are looking for a single rise in 2020.
- They cut GDP growth in 2019 to 2.1% from 2.3% and 2020 growth to 1.9% from 2.0% in December
- They also lowered PCE inflation to 1.8% from 1.9% and 2020 inflation to 2.0% from 2.1% in December.
- They raised 2019 unemployment rate to 3.7% from 3.5% in December and the 2020 rate to 3.8% from 3.6%
Nevertheless, Fed's Powell did say the US economy was in a good place and that the goal is to sustain expansion. He spoke positively that it is a "great time for the Fed to be patient, watch and wait" and that data is not indicating "a move in one direction or another" (hence the 0 hikes in 2019). The Fed is clearly on the sidelines.
All that sent the USD lower on the day (it was higher at the start of the day). However, it was not weak enough to overtake the GBP's weakness (more on that later).
Below are the % changes of the major pairs vs each other. While the GBP and the USD were lower, there was some flight to safety moves into the CHF and JPY. The EUR also moved higher today.
Meanwhile, the US stocks ran higher on the headlines, but ended up giving up the gains vs the Dow and the S&P stocks. The Nasdaq meanwhile, held onto small gains but like the S&P and Dow ended well off the highs.
European shares did not fair any better. The German Dax fell 1.57% on the day and closed near the lows as BMW and Bayer shares slumped on earnings concerns. For the German Dax, it also moved away from its 200 day MA above. Yesterday, that MA was broken briefly for the first time since August 2018. Bearish (see post here).
In the US debt market, the dovish Fed (and concerns about the economy) sent yields tumbling lower on the day (also contributed to the dollars fall). The 2 and 5 year moved the most (down -7.2 bps and -10.1 bps respectively. The yield curve flattened.
The news was not all US focused. As mentioned the GBP was the runaway weakest of the major currencies today. With the clocking ticking to the March 29th Brexit date, PM May signaled that she would request an extension to June 30, but that the date would be the final drop dead date. Headlines and rumours about whether the EU 27 would grant the extension (stay tuned until tomorrow), but I can't imagine that despite the chatter that the request might be rejected, that it would indeed happen.
Nevertheless, the GBP was weak coming into the NY session - and despite some ups and downs post the FOMC - remained weak at the end of the sesssion.
Some levels to eye in the new day for some of the major pairs:
- The EURUSD moved up to the underside of a broken trend line at the 1.1446 area and stopped. The pair is back down retesting the end of Feb/beginning of March highs at the 1.1408-18 area. The 38.2% of the move up today is at 1.1404. A move below would give buyers some reason to lighten up a bit.
- The GBPUSD had really sloppy trading day (see post here). It was messy. The pair rallied on the dollar selling, but stalled ahead of the 100 hour MA at 1.3252. Traders - in my mind - can take the pair either way. If take a positive view that the EU will approve the extension and that somehow, someway, the lawmakers will hunker down and get a deal done in 3 months, the upside can be squeezed. Alternatively, it is easy to also see a no-deal stalemate. For traders, therefore, pick your spots, be patient, OR even sit this one out until there is more certainty.
- The USDJPY fell below its 200 hour MA at 110.896 and that will be a risk level for shorts into the new day. Stay below keeps the sellers more in control. On the downside, the 110.31 is hte 50% of the move up from the end of January swing low and also near a swing low from the end of February.
- The NZDUSD moved above a trend line at 0.6866 only to rally into another higher trend line at 0.6922 (see chart below). We trade back down toward the lower trend line at the start of the new day. A break below will be more bearish. PS not a great help to the NZD (and AUD) was comments from Pres. Trump that he is mulling keeping tariffs on China for a long time. So trade deterioration is something to eye in the new day.
