Risk appetite was positive up today. This was evident as the yen, a safe haven currency, was weaker in European trading and resulted in the USD/JPY pair bouncing back above the 114 yen level from a low of 113.36.
Oil also acted as a barometer of market sentiment. US oil rose steadily throughout the European session from $28.71 to breach the key $30 a barrel level. In afternoon trading it eased lower as skepticism builds over a deal with Iran at Doha. On Tuesday, Russia, Saudi Arabia, Venezuela and Qatar made an agreement to freeze output at January levels but Iran appears opposed to this deal and vows to increase its production levels. Iran has only recently had sanctions lifted and finds it illogical to curb its oil production after this.
The euro started the session from a high of $1.1178 but edged lower throughout the day. There was no catalyst for any major moves as there were no key Eurozone data releases today.
UK employment data were the highlight of the European session. Sterling was given a boost early in the session after some good numbers, especially weekly earnings ex-bonus. Despite the December quarter unemployment rate remaining steady at 5.1% versus 5.0% expected, unemployment is still near recent historic lows. What attracts attention lately is signs of upward pressure on wages. Average weekly earnings rose 1.9% in December, in line with expectations but ex-bonus wage growth picked up a little from 1.9% to 2.0%.
The boost to the pound was short lived and it fell back down from $1.4338 as the market is primarily focused on Brexit concerns and what the UK government will achieve at this week’s EU summit negotiations.
There was a raft of data out of the US today which mostly surprised to the upside. Industrial production rose more than expected in January, rising 0.9% and reversed the revised 0.7% drop in December.
US building permits were seen rising at a 1.200 million pace in January but beat this forecast and rose at a 1.202 million pace instead. PPI beat expectations and rose 0.1% in January on a month-to-month basis while it was expected to fall by -0.2%.
The FOMC minutes are the next big event on the US calendar. This should attract market attention as investors are keen to see if the minutes could shed some more light on the Fed’s decision-making process on monetary policy, although after Fed Chair Janet Yellen’s testimony last week, they might be somewhat outdated.
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