Monday, March 18, 2019

Fed To Stay Put This Week Keeping The Greenback In Check

Tags
  • Dollar
  • Gold
  • Yen
  • Euro
  • Pound
  • Stocks

MORNING BRIEFING
The Dollar starts the week on the defensive ahead of the Fed monetary policy meeting on Wednesday and on the back of another soft piece of US data. On Friday, the Industrial and Manufacturing Production figures missed their marks and even though Consumer Sentiment printed better than expected the takeaway for the greenback was bearish, hinting towards more downside. The European majors have benefited from this trend of weakness but still hold below key resistance levels, which will likely be tested over the next few days. Equities ended last week in the green and futures point higher this morning, while Gold printed a lower high and Oil stalled ahead of the $59 mark.

The Federal Reserve monetary policy meeting will be one of the key events of the week ahead but unfortunately for the Dollar bulls there's little hope for any support from Powell and Co. The Fed has decided to stay put for the time being in regards to their interest rate policy, amid global growth headwinds and there's no evidence to suggest that they will change their tune at this stage. Even though the US economy has seen some recent strength in various sectors, inflation remains low and this will force Powell to stay true to his patient approach, pushing the Dollar lower. Dollar/Yen is treading water around the 111.50 area and further Dollar weakness will drive prices towards the 111 mark.

Theresa May's newest attempt to get her deal through the Parliament will also dominate the headlines this week. May is rumored to again try to get her deal approved by the Commons this week but she may pass on this attempt if she sees no additional support gathering. Nevertheless, Sterling is trading around the 1.33 mark on the back of the decision to request a delay in Article 50's deadline and we should see further gains if the request is made official and granted by the EU. The near-term resistance remains around the 1.3350 mark and if this is penetrated then prices will trend towards the 1.35 area.

The Euro is capped by the 1.1340 resistance on the short-term charts but Dollar's weakness allows for some conservative optimism. Consumer prices printed in line with expectations last week but the shared currency didn't move higher, given the broader bearish bias supported by ECB's guidance. However, if the Dollar continues to under-perform then the Euro may see some more upside in the short term, especially if the ZEW Survey tomorrow prints in a positive manner; prices may trend towards the 1.1370 and 1.14 areas. Otherwise, a failure to overcome the 1.1340 ceiling will push prices towards 1.13 again.

Gold attempted to pick up some steam towards the end of last week, on the back of the weaker Dollar but lacked follow-through. Prices made it to the $1,305 level before dropping lower as broader signs of progress in the geopolitical fronts keep investors at bay. However, if the Dollar sees more losses, Gold will again attempt to climb higher with the $1,305 and $1,310 levels the areas to keep an eye on. Oil reached $59 but stalled, however the bias is still positive and given the recent comments from OPEC+ on further production cuts we remain optimistic over prices hitting $60 soon.

Global equities closed in the green on Friday and the Asian markets are following suit this morning. Steady central bank policies in regards to interest rates and limited geopolitical risks on the horizon are supportive catalysts allowing investors to stay positive and look for bargains. Equity futures in Europe and the US are pointing higher this morning too so we should be in for a bullish opening bell for the week ahead.

MARKET EVENTS TO WATCH

  • Euro-Zone Trade Balance - 2pm
  • US NAHB Housing Market Index - 6pm

All times are GMT +4.