The US dollar had a disappointing day yesterday after the latest FOMC minutes proved to be every bit as unenlightening as most had expected them to be. Markets are now pricing the odds of a hike in May, higher than the prospects of a move in March, particularly since the phrase that a hike would be warranted “fairly soon” would suggest that a move in March may well be too soon.

While US markets finished the day slightly higher, and the Dow made another record close on rather vague comments from new US Treasury Secretary Steve Mnuchin, about wanting to have significant tax reform in place by the end of the summer, it would appear that once again the rally is starting to look a little tired.

Next week it will be three weeks since US President Trump promised something “phenomenal” with respect to tax reform and it is becoming clear that investors are starting to become a little restless.

If we don’t get further detail by the time President Trump addresses a joint sitting of Congress on Tuesday 28th February then the rally that we’ve seen in the past three months could become susceptible to some profit taking.

In Europe equity markets had a disappointing day with the DAX unable to hold onto gains above the 12,000 level, while the FTSE100 has struggled above the 7,300 level.

It would appear that even with markets at or near their highest levels this year, and with economic data showing decent signs of resilience investors are still only too aware of the political risk of the upcoming French elections, as the polls continue to fluctuate for and against Marine Le Pen.

While no-one seriously thinks that Ms Le Pen will win in the second round bond markets aren’t taking any chances with the spread differentials between German and French 2 year paper still at their widest levels since the euro zone debt crisis, despite the recent recovery in French bonds yesterday after centrist candidate Francois Bayrou allied himself to Emmanuel Macron.

On the companies front we wind up the UK banks reporting season with the full year results from the perennial problem child of the sector Royal Bank of Scotland, and expectations aren’t particularly high. A ninth successive year of losses is expected as the bank sets aside further provision for legacy issues. In January it set aside another £3.1bn provision in respect of its outstanding case with the US Department of Justice, and that’s without its other legacy issues, though at least its Williams and Glyns woes look to be behind it.

In recent quarters the underlying retail business has been doing ok, posting profits in every quarter last year, unfortunately the bank can’t escape the anchor of its legacy issues. This is likely to cloud the outlook for investors and keep the prospect of any sort of dividend a distant prospect.

EURUSD – the euro continues to chop around despite this week’s new low at 1.0493.The bias still remains for a move lower to the lows this year near 1.0340. We need to recover back through the 1.0680 area to retarget the highs at 1.0800.

GBPUSD – having held above the 50 day MA at 1.2400, we’ve moved back towards the recent high at 1.2580. We now need to push back through 1.2600 to retarget the 1.2700 area. Only a move below 1.2400 targets the 1.2250 area.

EURGBP – the failure to recover the 0.8520 area has seen the euro remain under pressure with the 200 day MA now likely to act as resistance. While below 0.8520 the bias remains for a move towards the December lows at 0.8300.

USDJPY – still in mid-range between the recent peaks just below the 115.00 level and the range lows at 111.60 in the short term. We have minor support at 112.30, while a move below 111.50 targets the 110.00 area.

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