FOMC MINUTES IN THE HEADLINES ON WEDNESDAY
Monetary policy will dominate the headlines on Wednesday in a week filled with high-profile data releases. The minutes of the December Federal Open Market Committee (FOMC) meeting will be closely scrutinized by market participants involved in equities and currencies.
Investors can expect a steady stream of economic data ahead of the FOMC minutes. Action begins at 08:00 GMT with a report on Spanish unemployment. Over the next 30 minutes, investors will also monitor a pair of Swiss reports, including retail sales and PMI.
At 09:00 GMT, investors can expect the latest German unemployment figures to make the rounds. Unemployment in Europe’s largest economy is forecast to drop by 12,000 in December, with the overall jobless rate holding steady at 5.5%.
IHS Markit and the Chartered Institute of Purchasing & Supply will report on UK construction PMI at 09:30 GMT. The monthly indicator is expected to fall to 52.7 in December from 53.1 the previous month.
Reports on Portuguese consumer and business confidence will make the rounds ahead of the North American session.
Headlining the US economic calendar is the monthly manufacturing PMI courtesy of the Institute for Supply Management (ISM). The monthly gauge is expected to show a reading of 58.2 in December, unchanged from the previous month.
Separately, the Department of Commerce will report on construction spending for the month of November. Construction outlays are projected to rise 0.6% in November after rising 1.4% the previous month.
The FOMC minutes will be released at 19:00 GMT, and will provide a more granular look at the Federal Reserve’s decision to raise interest rates last month. The FOMC is expected to continue its path of gradual policy normalization under the guidance of Jerome Powell, who takes over as Chair in February.
The euro opened the year at four-month highs, as the greenback posted sharp declines against a basket of currencies. The EUR/USD exchange rate advanced past 1.2050 on Tuesday, and would later settle around 1.2060. At press time, the pair was trading in the mid-1.20 region, with initial resistance likely to come at 1.2095. On the opposite side of the spectrum, the pair faces immediate support at 1.2020.
Pound sterling also enjoyed strong upside on Tuesday, with cable trading at more than three-month highs. The GBP/USD is trading right around the 1.3600 mark, with the bulls eyeing fresh highs near 1.3655. That represents the high point of 2017.
The USD/JPY resumed its downtrend on Tuesday, with prices falling to their lowest level in a month. The pair recovered slightly overnight, but continued to trade around 112.33. The pair risks falling below the first technical support near 111.75, which represents the 200-DMA. On the flipside, resistance is likely found at 112.50.