➤ Dollar dips as Fed reiterates patience on further rate hikes.
➤ Chinese Vice Premier Liu He expected to travel to U.S. later this month.
➤ Asian, European equities mixed; U.S. stock futures point to muted open.
The dollar weakened as Federal Reserve policymakers doubled down on their apparent dovish shift on the projected path of interest rate hikes in 2019.
Fed Chairman Jerome Powell said yesterday that the central bank will "watch patiently and carefully" in the coming months as it tries to gauge whether the economy will turn sour in 2019, but noted that incoming economic data do not show "any evidence of a slowdown." Fed Vice Chairman Richard Clarida echoed Powell's remarks, saying they can "afford to be patient" and wait to see how economic data evolves during the year.
Their comments followed the release of the minutes from the December 2018 meeting of the Federal Open Market Committee, which has penciled in two rate increases this year amid muted inflation pressures and growing worries on the economic outlook. U.S. inflation data due today will thus be closely watched by investors to see if it will influence the FOMC in any way, Rakuten Securities Australia wrote.
The dollar spot index, which measures the U.S. currency against a basket of peers, dipped 0.22% to 95.33 as of 6:30 a.m. ET. The euro rose 0.21% against the dollar, while the Japanese yen was up 0.10%.
Sterling appreciated 0.36% against the dollar, having briefly breached $1.28 after an Evening Standard report said Britain's exit from the EU could be delayed due to a growing backlog of essential bills that must be passed, before pulling back gains. The Chinese yuan strengthened further against the dollar, rising 0.68% to 6.74 yuan.
In the equity markets, the S&P 500 index yesterday closed 0.45% higher for a fifth straight day of gains, though the retail sector took a hit after Macy's Inc. cut its full-year earnings outlook following the holiday selling period and Kohl's Corp. reported November and December 2018 sales growth that marked a slowdown from the previous year. Futures point to a muted opening for Wall Street this morning.
Asian stock markets gained, with the Shanghai SE Composite rising 0.74%, Hong Kong's Hang Seng index adding 0.55% and Japan's Nikkei 225 index gaining nearly 1%, as renewed optimism on improving trade relations between the U.S. and China offered support.
U.S. Treasury Secretary Steven Mnuchin reportedly said Chinese vice premier and top economic official Liu He is expected to visit Washington to further discuss bilateral trade later this month. Earlier this week, three days of vice-ministerial-level trade talks between the U.S. and China ended on a positive note, but without a permanent deal on ending tit-for-tat tariffs on each other's exports.
European equities followed Asian peers higher before pulling back, with the FTSE 100 eking out a 0.07% gain, Germany's DAX index slipping 0.22% and France's CAC 40 index dropping 0.30%.
In the bond markets, Treasurys rose as 10-year yields dipped 3 basis points to nearly 2.72%. German Bunds fell as 10-year yields added 5 basis points to 0.245%.
Among commodities, Brent crude oil advanced 0.32% to $61.88 per barrel on the ICE Futures Exchange. Gold added 0.39% to $1,292.40 per ounce.
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The day ahead:
8:30 a.m. ET — U.S. CPI (Econoday consensus: -0.1% monthly, 1.9% yearly)
1 p.m. ET — U.S. Baker-Hughes rig count