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Asia morning update: Dollar down on Fed minutes

Amid the indecisiveness seen in stock markets, providing little inspirations for the Asian session today, the US dollar had well captured the movements from overnight drivers. 

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The end of the week heats up with data releases while the focus on monetary policy turns to Europe with the ECB minutes due.

US dollar barometer

July’s Federal Open Market Committee (FOMC) meeting minutes had been the key driver for price action overnight, weighing upon the US dollar alongside political woes in the US. The US dollar index was seen slumping more than 4 big figures, down to 95.50 levels into Thursday morning in Asia. After the lift from Fed Dudley’s comments and retail sales surprises, the split view within the Fed FOMC had been a dampener to the USD recovery. Concerns of persistently soft inflation remains rife despite Federal Reserve chair Janet Yellen sticking largely to the view that ‘temporary factors’ had been accountable for the lack of inflation growth in her semi-annual testimony to congress prior to July’s Fed meeting.

Following the weaker than expected July CPI numbers, the Fed may have little ammunition at hand to convince the market of a December hike and their stance – whether to shrug off the weak inflation numbers and continue on gradual approach towards interest rates lift-off – in the upcoming Jackson Hole symposium next week will be highly scrutinized by the market, expected to be next big Fed event for markets.

That said, from a technical perspective, we have certainly seen the US dollar index holding above last week’s lows after the higher-high printed earlier this week and a convincing close above the 94.00 figure would be needed to take some pressure off the downside. 

US Dollar Index

US dollar index_170817

US political concerns brewing?

Making headlines overnight had also been the surprise dissolving of President Donald Trump’s advisory council. Equity markets had largely brushed off the event, clocking mild gains on the likes of the S&P 500 and Dow Jones indices, having their own indecisiveness to struggle with. The concerns for markets likely stems from a policy perspective as the President’s team work on the policy reforms in the background and now without the Strategic and Policy Forum to ‘aid vital policy discussions’. While of concern, the market had seemingly been patient with the new administration on the policy end any heightening of jitters does not seem to be the case currently.

Mixed day for Asian markets

Mixed movements are expected for regional markets on Friday although the Hong Kong index is expected to continue the rally following strong earnings reports from Tencent after hours yesterday. The company, which takes up a massive 11.3% weightage on the Hong Kong bourse, delivered its best quarterly results. Attention will dive to another Chinese tech company, Alibaba, in the day with expectations for performance to trend positively alongside Tencent as seen with the dive in short interest of late.

Separately, Singapore’s July non-oil domestic exports (NODX)’s arrived this morning missing market consensus. The headline miss may only be a part of the equation for a potentially weak day for the local bourse. Adding on to the pressure would be the decline in crude prices which could make for a third consecutive day of decline for the STI. Watch for ECB minutes due later in the day.

Yesterday: S&P 500 +0.14%; DJIA +0.12%; DAX +0.71%; FTSE +0.67%

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