North American Summary and Highlights 31 Jan

North American session

Ahead of the FOMC the USD lost some ground, responding to not only weaker than expected ADP Employment (+107k) and Employment Cost (+0.9%) data, but also a revival of banking sector concerns with the stock of New York Community Bancorp falling sharply. The move was most pronounced on USD/JPY which fell from above 147.50 to near 146 before making a limited correction. USD losses elsewhere were more modest and with more significant corrections ahead of the FOMC. Canadian GDP exceeded expectations with a 0.2% November increase. USD/CAD fell below 1.34 before returning to near the figure.

The USD saw a modest recovery on the FOMC statement which stated the FOMC needed more confidence inflation was moving sustainably to target before easing, but this was more than reversed early in Powel’s press conference, after he said he expected that rates had peaked and easing would be seen this year. However the USD regained momentum after he stated did not see it as likely that the Fed would ease in March. USD/JPY moved back above 147 and most other pairs saw the USD back around the day’s highs, with EUR/USD briefly trading below 1.08. USD/CAD moved above pre-data levels. .European morning session

The USD was net little changed in the European morning, but saw some modest losses against the EUR and AUD while gaining a little ground against the CAD. Initially, USD/JPY fell sharply from 147.90 to 147.40, but recovered nearly all this ground by the end of the session. GBP/USD also saw short-lived gains to 1.2695 before falling back to opening levels near 1.2670. 

EUR/USD gained around 10 pips on the session, despite weak German retail sales data released at the open. This showed a 1.6% m/m decline in December following a 2.2% decline in November, and was well below consensus. German state CPI and French preliminary CPI data were both broadly in line with expectations.