The Japanese yen is lower in the Tuesday session. Currently, USD/JPY is trading at 113.60. On the release front, Japanese Flash Manufacturing PMI improved to 53.5, beating the estimate of 52.1. This marked a sixth consecutive month above the 50-point line, which separates expansion from contraction. Elsewhere, All Industries Activity came in at -0.3%, shy of the forecast of -0.2%. This ended a streak of five straight gains. There are no major events in the US today. On Wednesday, the Federal Reserve releases the minutes of the January policy meeting.
After Fed Chair Janet Yellen’s upbeat take on the US economy, the markets are keen to review the Fed policy minutes, which will be released on Wednesday. Testifying before Congress last week, Yellen noted that inflation is moving towards the Fed’s 2 percent target, the labor market remains red-hot and consumer spending is strong. Yellen strongly hinted that a rate hike was imminent, leaving the markets to speculate if the Fed prefers to make a move in March or June. If the US economy stays on track in 2017, analysts expect two or three rate hikes of a quarter-point. At the same time, the Fed wants to take into account the economic stance of the new administration, but this remains an elusive goal. Donald Trump continues to have difficulty filling in key cabinet positions and the media continues to probe connections between Trump officials and Russia. Trump has fired back by bitterly attacking the media, and lost in the mayhem is a clear and coherent economic policy. Although Trump has been in office for just over a month, the perception of a muddled and disoriented White House is creating uncertainty in the markets, and is, as Trump would say, "bad for business".
