This week, there are several important events and data releases scheduled, including the Federal Open Market Committee (FOMC) on tomorrow and the day after, the Bank of England Monetary Policy Committee (MPC) on Thursday, JOLTS Job Openings data on the 30th, ISM Manufacturing PMI on the 1st, and US employment statistics on the 2nd.
Given these events on the horizon, today is expected to be marked by a cautious and wait-and-see mood.
The FOMC is expected to maintain the current policy stance, with no significant changes expected in the statement. However, the market still holds strong expectations for a rate cut in March. Therefore, there may be some reluctance to make significant moves ahead of the FOMC meeting, as there is a possibility of hints regarding a March rate cut being provided in the statement or during the Chair’s press conference.
USD/JPY is expected to trade within a range, primarily between the mid-147s and mid-148s.
The euro has shown some signs of weakness, but there isn’t a strong drive to test lower levels against the dollar ahead of the FOMC meeting. EUR/JPY is supported by higher equities, but it has also experienced a significant rally since the beginning of the year, which may create resistance. Market participants will be monitoring the movements of USD/JPY while seeking the next directional move.
The British pound’s direction may be influenced by the MPC meeting on Thursday. There’s a possibility that expectations of an early rate cut could diminish, but GBP still faces resistance due to recent USD strength. GBP/USD is expected to trade within a range centered around 1.2700.
As for economic data today, there are no significant releases, so markets are expected to remain range-bound. However, it’s worth noting that news of a drone attack on a US military base in northeastern Jordan, allegedly supported by Iran-backed militants, has resulted in casualties, and President Biden has hinted at retaliatory action. Depending on further developments, risk-off sentiment could become prevalent.