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Minutes from the Fed’s Dec.18-19 meeting revealed that several policymakers were in favor of the US central bank keeping rates steady this year.

Broader market sentiment was also bolstered in early Asian trade amid signs of progress in U.S.-China trade talks. Trade tensions between the world’s two largest economies had rattled markets for most of last year.

·       “The Fed has acknowledged market concerns with its language. The markets are clearly reading into this as a more accommodative stance,” said Michael McCarthy, chief markets strategist at CMC Markets.

“Optimism on US-China trade talks is also bolstering risk sentiment...the sharp rally in oil prices is also indicative of the fact that global growth fears were probably overdone,” added McCarthy.

·       The dollar index was marginally lower at 95.14, after losing 0.7 percent on Wednesday. The index has weakened in four out of the last five sessions as traders wager that U.S. interest rates will stay steady in 2019.

The dollar had gained 4.3 percent in 2018 as the Fed hiked rates four times on the back of a strong domestic economy, falling unemployment and rising wage pressures.

The euro and sterling each gained marginally on the dollar, fetching $1.1547 and $1.2794 respectively. However, traders expect the strength in both these currencies to fade in the coming weeks.

·       With the UK government still working its way to the UK parliament with the Brexit agreement approval, the Brexit uncertainty is set to prevail the end of2018 and the beginning of 2019. The 2019 GBP/USD Forecast is highly dependent on the result of the Brexit deal going forward and with no fundamental bias, all options are still on the table leaving different GBP/USD scenarios all applicable.

Sterling could fall past 1.2000 level that historically frames the bottom and serves as a territory of rebound for GBP/USD in case of hard Brexit. The rational solution for all involved parties in the UK parliament, the UK government and in the EU should be to avoid the scenario of no-deal Brexit that would throw the UK economy and Sterling into disarray with the Bank of England saying the bottom for Sterling would be some 25% lower from here, indicating sub parity levels for GBP/USD. Also, no transition Brexit would represent an adverse scenario for Sterling with falling to the lowest level since 1985 of 1.0700.Such scenarios are still considered unlikely. Should such scenarios materialize, it is almost a sure-shot for traders to experience the deal of the lifetime while buying GBP/USD at historical or/and cyclical lows.

·       Minutes from December’s ECB policy meeting headline an otherwise lackluster economic calendar in European trading hours. The release may not offer much by way of directional guidance for the Euro considering markets have already priced out an interest rate hike in 2019.

Later in the day, the spotlight turns to scheduled comments from Fed Chair Jerome Powell. A dovish surprise seems unlikely considering the extent to which the markets’ policy bets have already shifted in that direction, especially after yesterday’s FOMC minutes publication.

Balanced rhetoric suggesting the central bank’s recent pronouncements were meant to signal the absence of pre-commitment rather than an abandonment of tightening altogether might catch markets wrong-footed however. That might trigger a rebound in the U

·       Federal Reserve policymakers have indicated they may be open to tweaking a longstanding plan to shrink the central bank’s balance sheet, including by shedding housing-backed bonds earlier than anticipated or keeping a bigger-than-expected portfolio of assets.

The Fed is now trimming its holdings by $50 billion each month, an amount intended to reduce the portfolio to a more “normal” size over a number of years without putting too much pressure on the Fed’s short-term policy rate.

It has now shed more than $380 billion worth of U.S. Treasuries and mortgage bonds. But reserves are declining at a much faster rate, dropping to $1.51trillion at the end of 2018, from a 2014 peak of more than $2.7 trillion.

·       Germany’s influential BDI industry association has called on the European Union to adopt a tougher economic policy towards China to help firms as concern mounts over price dumping, technology transfer and unequal access to licenses and financing.

·       Oil prices fell by about 1 percent on Thursday on swelling U.S. supply and amid a cautious reaction to trade talks between the United States and China, the world’s two largest oil consumers, that finished without concrete details to ending their dispute.

U.S. West Texas Intermediate (WTI) crude oil futures were at $51.80 per barrel at 0432 GMT, down 56 cents, or 1.1 percent, from their last settlement.

International Brent crude futures were down 0.9 percent, or 57 cents, at $60.87 per barrel.

·       Meanwhile, U.S. bank Morgan Stanley cut its 2019 oil price forecasts by more than 10 percent on Wednesday, pointing to “weakening economic growth expectations” and rising oil supply from especially from the United States as reasons for their lower price forecast.

·       CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are testing support-turned-resistance in the 49.41-50.15 area. A break above that confirmed on a daily closing basis sees the next upside hurdle in the 54.51-55.24 area. Immediate support is in the 42.05-55 zone. A turn lower that takes prices below this barrier opens the door for a challenge of the August 2016 bottom at 39.19.