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Asian shares weakened, carrying forward the weak sentiment in the US overnight. The US dataflow was firm, both the employment trends index and US consumer credit were solid, but had little impact on the market as reemergence of Ukraine tensions captured the headlines. Wall Street fell with the DJIA and the S&P 500 indices losing -1.02% and -1.08% respectively. European shares were also lower as the ECB downplayed QE imminence.

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Sentiment Dampened amidst Concerns over Russia’s Invasion in Ukraine

Despite the central bank’s rate hike, Turkish lira erased the gains made over the previous day and Turkish benchmark equity index dropped more than -2%. The rate hike by South Africa’s central bank also managed to boost the rand just temporarily. These were resulted from concerns over capital outflow as the Fed furthered its tapering steps.

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Emerging Markets Selloff Resumes as Fed Tapers Further

US employment data surprised to the upside in October. Despite the 16-day partial government shutdown, non-farm payrolls increased +204Kwith the private sector adding +212K. The dysfunction eliminated 8K from government positions. September’s addition was revised up, by +15K, to 163K. The unemployment rate climbed up to 7.3% in October from 7.2% in the prior month. Meanwhile, the participation rate drifted -0.4% lower to 62.8% during the month.

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Weekly Fundamentals – Strong US Data Sent USD and Yields Higher, Gold Lower

In RBA’s minutes for the July meeting, policymakers signaled that the current monetary policy was appropriate given decline in the Australian dollar, although it noted that further rate cut might be possible although inflation have picked up.

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RBA Minutes Downplayed Easing Bias

Japanese shares slumped on Monday after the release of the BOJ minutes showed that some policymakers were concerned that the 2% inflation target is hard to achieve. The minutes for the meeting on April 26 showed that “a few” board members believed that it’s “highly uncertain whether changes in inflation expectations would lead to a rise in the actual rate of inflation”.

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BOJ Minutes Dampens Sentiment

Geopolitical tensions have supported gold prices, allowing the yellow metal to stay above 1550. Negotiations between Iran and the IAEA representatives stalled with several envoys walking out for sometime after Iran accused Israel of genocide.

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Gold Steadies as Supported by Nuclear Worries

News headlines and economic data set the market in a negative tone and stocks and risky assets weakened further after the FOMC minutes indicated the possibility of an early termination of QE.

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Bearish Sentiment Continued amid Worries over Chinese Property Tax Plan

The US Dollar Index is trading near 5 month highs today as the US Federal Reserve mulls an early end of their monetary easing programme, pushing the dollar high against most major world currencies.

Latest US Dollar Index Rate

The Dollar Index, which tracks the greenback against a basket of major world currencies was at 81.385 17:59 GMT today after hitting 81.618 earlier in the day. A highe dollar tends to weigh on oil prices and other commodities.

Early End to US Monetary Easing – QE3?

The Fed has been buying $85 billion dollars a month of bonds in its efforts to stimulate the American economy. Minutes of the Federal Reserve’s January meeting released Wednesday showed differences in Fed officials thinking on the central bank’s current pace of asset purchases.

“The tone of the minutes has significantly shifted to the hawkish side,” said analysts at Morgan Stanley. “The Fed minutes have brought forward market expectations that the FOMC will end QE3 in the second half of this year rather than in the first half of 2014, which is US dollar positive.”

Meanwhile, a US regional manufacturing gauge for February unexpectedly turned negative, capping the dollars morning strength, while the euro remained under pressure after purchasing managers signaled that the euro zone is unlikely to exit from recession in the first quarter.

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This article was written by: JR @ liveoilprices.co.uk

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US Dollar Index at near 5 month high today as US mulls early end of monetary easing