TALKING POINTS – US DOLLAR, YEN, ISM, STATE OF THE UNION
- Upbeat services ISM data might cool risk appetite, boost Yen and US Dollar
- State of the Union eyed for clues on US-China trade talks, another shutdown
- Aussie Dollar gains as RBA policy statement strikes cautiously upbeat tone
Another quiet offering on the European economic calendar is likely to yield to the spotlight to US releases. January’s non-manufacturing ISM survey is on tap, with analysts calling for a slight slowdown in the pace of service-sector activity growth.
Broadly speaking, US data outcomes have improved relative to baseline forecasts since the beginning of the year. That sets the stage for an upside surprise that might encourage the recent shift to a less-dovish Fed policy outlook, cooling risk appetite. The US Dollar and Japanese Yen may rise in this scenario.
US President Donald Trump is also due to deliver the State of the Union address. Markets will cheer if he uses the occasion to talk up an on-coming trade deal with China and downplay the chance of another government shutdown. A more combative tone might stoke risk aversion however.
AUSSIE DOLLAR GAINS ON GENTLY UPBEAT RBA STATEMENT
The Australian Dollar outperformed in otherwise quiet Asia Pacific. The currency recovered from early losses following disappointing retail sales data as the RBA offered a cautiously upbeat assessment of the economic statement in its policy statement.
A recent run of disappointing economic data and sinking inflation expectations appear to have primed markets for a more dovish tone. Still, priced-in policy bets suggest markets are leaning toward no rate increase this year. In fact, the probability of a cut has crept higher recently and now stands at nearly 36 percent.
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ASIA PACIFIC TRADING SESSION
EUROPEAN TRADING SESSION
** All times listed in GMT. See the full economic calendar here.
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