Forex Today – 18/01: US Rate Cut Odds Drop to 61%

Markets continue to discount the possibility of a first rate cut by the Federal Reserve at its March meeting, sending stocks lower and the US Dollar higher.

  1. Markets have continued to assess a lower chance that the US Federal Reserve will act to cut rates at its March meeting. Yesterday the CME’s FedWatch tool showed a 65% chance of a cut in March, that reading how now fallen to 61%. This move was partially triggered by stronger than expected US Retail Sales data yesterday, which suggests the US economy is still too strong to be unconcerned about the potential impact of rate cuts. Another factor was the small, unexpected uptick in UK inflation data yesterday. Markets were impacted with a stronger US Dollar and weaker stock markets.
  2. In the Forex market, the Japanese Yen has been the strongest major currency since the Tokyo open today. The US Dollar has been the weakest, putting the USD/JPY currency pair into focus.
  3. Gold fell quite strongly yesterday but seems to have found some support at the $2000 round number area.
  4. Australian Unemployment data released a few hours ago showed a small undershoot but the unemployment rate remained constant at 3.9%.
  5. Cocoa futures reached a new multi-year high price yesterday, which will keep trend traders interested in this commodity on the long side. It has been exhibiting a powerful bullish trend for more than a year now.

There will be a release today of US Unemployment Claims data which is expected to show that 206k new claims were made most recently.

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