FX market outlook

There was limited price action today as investors remained sidelined ahead of big risk events coming up this week. Major currencies mostly traded in tight ranges during the Asian session, with risk-off sentiment keeping trading volumes low and also a lack of major economic releases kept the market focus on the meeting between US President Donald Trump and China’s President Xi Jinping that will take place over two days, starting on Thursday.

This will be the two leaders’ first face-to-face meeting since Trump took office on January 20. Trade and security issues are high on the agenda. The US President has in the past described China as a currency manipulator and he also accused it for its unfair trade practices.

Friday’s US nonfarm payrolls will also attract a lot of attention in the markets, while tonight’s FOMC minutes will be eyed as investors hope to get more insight on the outlook for US interest rates after the Federal Reserve’s March meeting in which it raised interest rates.

The dollar index, which tracks the greenback against a basket of six trade-weighted currencies, was slightly trading lower on the day so far since Monday’s close of 100.54.

The greenback edged down against the yen to reach an Asian session low of 110.52 after reaching an early session high of 110.90.

The euro moved slightly higher against the dollar to $1.0688 after falling to a three-week low of $1.0634 yesterday. The TV debate between French presidential hopefuls yesterday indicated that far-right candidate Marine Le Pen did not do as well against centrist Emmanuel Macron and this helped support the euro.

Sterling halted a two-day decline against the dollar and traded a tight range in Asia around $1.2440. Focus will be on UK services PMI data due later today, which could have an impact on the pound.

WTI oil prices rose for a second consecutive session to its highest levels in more than a month at $51.34 per barrel after industry-related data showed diminishing US stockpiles. According to the American Petroleum Institute (API), crude inventories fell by a more than expected 1.83 million barrels to 533.7 million barrels at the end of last week. Additionally, news of a production outage in the North Sea also had an effect on oil prices. Meanwhile, increased support for an extension of the OPEC output cut deal is also lending support to oil prices.

Gold pulled back slightly after rising for three consecutive days, to trade around $1255 an ounce following a test of the key $1260 level yesterday.

Upcoming economic reports of note for investors will be the UK services PMI data and the ISM non-manufacturing PMI and ADP jobs numbers out of the US. Minutes from the March Fed meeting are due to be released as well. Fed speakers today include William Dudley and Daniel Tarullo.