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More patience from the Fed

USD

There were two inter-related issues for the USD on Wednesday; inflation and the Fed. Both turned out to be at least a little helpful, though not enough to make it a great day for the dollar. The consumer price index data showed the headline rate of inflation accelerating from 1.5% to 1.9% while the core rate, ignoring food and energy prices slowed from 2.1% to 2.0%. The headline rate beat forecast by a whisker, the core reading missed by a similar margin.

The minutes of the Federal Open Market Committee ought not to have surprised investors. It is still the case that "the Committee will be patient" in adjusting policy. But there had evidently been a suspicion out there that the minutes would hint at the possibility of a rate cut. No such evidence was to be found so the USD edged higher.

EUR

Where the Fed was helpful to the USD the European Central Bank did no similar favours to the EUR. It was eventually unchanged on the day but only after it had recovered from an ECB-induced half-cent dip. As expected, the bank left its benchmark interest rates at rock-bottom levels and confirmed they would stay there "at least through the end of 2019". Although that time frame was not extended, the tone of the president's comments suggested that might happen in the future. He also insisted that the bank still has in reserve some scope for further stimulus, should it become necessary.

This morning's euro zone economic statistics related to inflation in Germany and France. There were no surprises: both were steady at 1.3% in March, as expected.

CAD

Another ecostat-free day in Canada coincided with a North American focus on the FOMC minutes. Thus is was that oil was once again the main driver for the CAD. WTI crude wandered back and forth across a narrow range of little 60 cents, losing a net 17 cents - 0.3% - on the day.

The CAD followed roughly the same course at roughly the same time, with roughly the same result. It is 0.2% lower against the USD.

GBP

It was all a bit of an anticlimax for the pound. The market had spent a week anticipating that EU leaders would agree a postponement of Britain's departure and at last night's summit meeting they did exactly that. If the six-and-a-half-month extension to Halloween was not precisely what they had had in mind, it did at least move the cliff edge back by a decent margin. The GBP is 0.1% firmer against the USD.

It remains to be seen how the British government will use that time. The prime minister's initial statement did not immediately fill investors with confidence that it will be used for anything other than a rerun of what she has already tried. With that in mind it is hard to see what will keep the GBP aloft, now that all the good news has been revealed.

JPY

With no domestic news to move things along the JPY was driven mainly by exogenous factors, specifically the European Central Bank president's commentary and the FOMC minutes. The first increased concern for the global economy, sending the safe-haven yen higher. The second sent the USD higher, eating into the yen's gains.

There was no data from Japan overnight other than money supply and international investment flows. The JPY is unchanged on the day against the USD.

USD: FOMC minutes less dovish than suspected

USD: FOMC minutes less dovish than suspected

EUR: Downturn "somewhat longer-lasting" than expected

EUR: Downturn "somewhat longer-lasting" than expected

CAD: Slightly lower after random walk

CAD: Slightly lower after random walk

GBP: Almost unchanged after Brexit postponement

GBP: Almost unchanged after Brexit postponement

JPY: Flat, driven by external factors

JPY: Flat, driven by external factors

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