Financial markets are trapped in a period of price consolidation in early Wednesday trade ahead of the US Federal Reserve Open Market Committee meeting later today. The January policy statement is set to be the big mover, although the FED Funds Rate is pricing almost zero change of an interest rate cut or hike today.
The Australian dollar received a minor boost against the US dollar earlier today after the Q4 Australian inflation report came in slightly higher than markets had been predicting. The AUDUSD pair also received a boost after Australian business conditions data showed a marked improvement.
The Reserve Bank Q4 Trimmed Mean CPI inflation came in at +0.4 percent, while year-on-year CPI increase by +0.7 percent. Despite the overall inflation beat inflation conditions continue to underperform the Reserve Bank of Australian target band.
WTI oil has bounced backed towards the $53.00 benchmark level after a large-than-expected draw in US crude inventories yesterday. A decline in COVID-19 cases is also helping to underpin the bid tone behind WTI oil.
The Nikkei 225 closed the day marginally higher with a + 0.30 percent gain intraday. The Bank of Japan head Haruhiko Kuroda said that central bank remains in profit with its stock holdings while the Nikkei 225 trades above the 21,000 level.
With the Nikkei 225 trading close the 29,000 level it means that the central bank currently has an unrealized profit of 27 percent. At lease traders and investors now know the line-in-sand for the central bank if weakness in the national stock market took hold.
One of the keys focuses for currency traders today will be sterling, as the British currency breaks to fresh multi-year highs against the greenback. The reasons for sterling strength at the moment is being attributed to optimism of the ongoing vaccine roll-out in the UK economy, which continues to outperform the European and US vaccine programme.
JP Morgan spot trading desk have put out a note this morning noting that “We generally remains supportive of the strong sterling view given the impressive vaccine rollout the UK has implemented. Of-course short-term virus worries remain a headwind, particularly as UK lockdowns look set to stay for a significant amount of time”.
As I have been noting recently, the British pound looks bullish against many crosses and major currencies over the short to medium-term. Sterling also has significant scope to progress towards the 1.3800 to 1.3900 area later today if the FED disappoint later today.
Gold and silver look fairly weak today after posting solid gains last week. Both metals have failed to break to the upside. If they fail to gain upside traction after today’s FED policy meeting, then bears may start to move in on both metals.
Durable Goods Orders and Mortgage Application will be the main focus during today’s US session, ahead of the release of the FOMC rate decisions and policy statement.
Traders also look to Q4 earnings for Tesla and Facebook. Expect volatility in both stocks. Apple also release Q1 earnings later today. Microsoft will be another focus after the stock breached its all-time price high yesterday, following a major beat in Q4 earnings.