Dollar Solid Ahead Of FOMC
Ashraf Laidi | Dec 12, 2017 11:42PM ET
The US dollar climbed ahead of the Wednesday's FOMC decision on signs of rising inflation. The Australian dollar was the top performer on Tuesday while the euro lagged. Japanese machine orders and the RBA's Kent are up before Yellen.
The US PPI report doesn't always foreshadow headline inflation but is often a clue. The November report showed pipeline pressures at the highest since February 2012, up 3.1% y/y compared to 2.9% expected. The US dollar got a lift from the report and continued higher for much of the day.
The USD also benefited from Congressional talk that passing the unified tax was imminent. That presents two-sided risks but early details show a 21% corporate tax rate, which is a touch higher than the 20% in the initial bill. What will matter more is how deductions and R&D are credited.
USD/JPY rose as high as 113.75, which was the best since November 14. The pair is slowly approaching the tough zone of resistance in the 114-115 range. It's a zone that's been tested four times in the past year and held.
The day ahead could be a big one on that front. If the FOMC hikes rates (an almost sure bet) and delivers some hawkish hints, along with a stimulative tax package, it could clear the way for a dollar rally into year end. However if the Fed decides to stay coy before Powell takes the reigns and the tax plan disappoints, the dollar could just as easily head in the other direction. Ashraf will post a full Fed preview in English and Arabic in Wednesday's early edition of this section.
Before then, some Asia-Pacific data could move markets. The RBA's Kent is due up at 0000 GMT. The market is increasingly expecting the RBA to stay on the sidelines for the first half of 2017 or longer. Yesterday's soft Q3 house price data underscored the challenges.
Another report to note is the October Japanese machine orders report. The consensus is for a 2.9% rise after the 8.1% drop in September.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.