It’s the yen that has really run away to the upside so far this week (and year), but at the other end of the scale, it’s mostly the commodity currencies that have struggled on the majors. The CAD is of particular note as USDCAD threatens a sustained push above the 1.40 level. A further easing from the Bank of Canada cannot be ruled out and it is divergence in underlying interest rate policy that is a very powerful fundamental driver of currency trends. For this reason, the Canadian jobs data this Friday could eclipse the US release for its significance to currency markets. Overnight, we’ve seen a further rise in the USDCNY reference rate and modest recovery in the stock market in China, this despite the latest Caixin PMI services data falling short of expectations at 50.2 (from 51.2). Geo-political tensions remain high with the news that North Korea tested its first Hydrogen bomb overnight. Naturally the Korean won added to yesterday’s weakness, pushing up just shy of the 1200 level.
For today, markets will be attempting to squeeze some juice out of the latest FOMC minutes from the December meeting. Given that they raised rates, the main focus will be any fresh indications of what will decide further policy moves. The accompanying statement was fairly detailed on this front and given the accompanying press conference, the risk is low that the minutes throw a curve-ball that will impact markets, but investors will be on their guard nonetheless. Before the FOMC minutes, we have final PMI data in the Eurozone at 09:00 GMT, with UK services data at 09:30 GMT. There is also services PMI data in the US and durable goods data.