Morning Commentary: A Minute for Minutes

A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.

A Minute for Minutes Share this story: Andrew Kositkun Foreign Exchange Head Trader

Over the past weeks, there has been a significant change in tone from many of the world's central banks. About a year ago, the world was looking at synchronized global growth and the prospects for rates to rise around the world.  That narrative has since taken a dovish turn with central banks such as the Bank of Japan, Federal Reserve, Reserve Bank of Australia, European Central Bank and others turning more accommodative.     This week the markets will be parsing the minutes from recent central bank meetings in hopes of finding insights into these banks' recent policy shift.  Case in point, the Reserve Bank of Australia (RBA) released, yesterday, its minutes from its February meeting and they read more dovish than the post-meeting statement. The Bank significantly downplayed its "glass half full" stance and members cited multiple factors, some of which could potentially lead to rate cuts.  Overall the probability, in the RBA's view, of a hike is now broadly balanced with that of a cut.   In the US, minutes from the most recent Fed meeting will be published tomorrow.  In a similar vein, market participants will be searching for the rationale behind the Fed's dovish pivot.  Possible reasons include the belief that downside risk have increased, increased market volatility indicating the markets are closer to neutral than previously thought, and increased labor slack due to an increase in the labor force participation rate.  Additionally the minutes will provide insights into the level of consensus around the change in language from the Fed.  As a final point, markets will also be interested in language around balance sheet normalization in an effort to gauge whether there is any support to the Lael Brainard's view that balance sheet normalization could end in 2019.  HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT: Trade talks between the US and China are set to resume this week in D.C. as Vice Premier Liu He is scheduled to meet U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Feb. 21-22.  This is expected to be the last round of talks before the current March 1 deadline.  BoJ Governor Kuroda made comments overnight that the BoJ could consider additional easing measures. However it should be noted he made these comments only when asked what the BoJ would do should the JPY rise further, making his response as expected.      The Department of Commerce submitted its Section 232 report to the White House.  The President now has 90 days to consider the recommendations in the report and enact any recommended automotive tariffs.  While the White House wants to keep the contents of the report a secret, a spokesperson for Angela Merkel indicated that the report does conclude European car imports are a threat to US national security.  16 states have sued President Trump over his use of emergency powers to fund a border wall. Additionally members of Congress are exploring legal and legislative options to challenge the President's decision.  US yields are lower as Loretta Mester, one of the more hawkish members, confirmed that she has joined others on the board with a more dovish outlook.

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