Intraday Market Thoughts

Dollar Higher on Minutes, Oil Drops

by Adam Button
Apr 9, 2015 0:15

We look at 'several' reasons not to be concerned with the FOMC minutes. The pound and kiwi were the top performers while the Canadian dollar lagged with oil. The Asia-Pacific scheduled doesn't have any notable releases. 4 new Premium trades were issued today related to CAD and NZD. These trades are slightly longer-term in nature. All trades and their respective trades are found in the Premium Insights.

The US dollar was a steady riser in US trading after falling earlier in the day. The crescendo came after the minutes of the March 17-18 FOMC meeting. It cited 'several' members who believed June was the appropriate time to hike rates.

The comment shouldn't come as a surprise. There is no definition of 'several' but it's likely in the 4-6 range. The hawks have been clear in speeches and include Lacker, Bullard, Mester, George and perhaps Williams. That list includes only two voters with the bulk of the FOMC expressing a preference to wait.

In addition, the minutes are three weeks old and in that time there have been several soft releases, including non-farm payrolls. Because of that, on Wednesday Dudley said the bar had been raised for a June hike.

What may be an increasing factor for FX is M&A. Two mergers totalling nearly $100 billion were announced in the past 24 hours and there is non-stop chatter about other sales. That could mean some lumpy FX flows in the months ahead.

In the short term, the Asia-Pacific market is quiet but we are keeping a close eye on oil as extreme volatility continues. In a market like crude where real demand rather than financial flows are the driver, sometimes there are days where the funadmentals clash with price action. Yesterday we wrote about the multitude of reasons to sell crude and after a large build in US supplies, the market finally broke down and eventually fell more than 5% on the day.


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