• The euro was on the defensive on Tuesday, under pressure from fears that the French Presidential election could upset the status quo, as rising anti-establishment sentiment surfaced after last year's Brexit and the U.S. election.
The premium that investors demand to hold French bonds instead of German debt rose to its highest since late2012 after a poll showed Right-wing candidate Marine Le Pen narrowing the gap with more centrist opponents.
The euro traded at $1.0614, having moved little on Monday due in part to a holiday out U.S. investors. It has fallen 1.75 percent so far this month.
The dollar was little changed versus the yen at 113.16 yen. It has been slipping, largely in tandem with a fall in U.S. bond yields, after hitting a two-week peak of 114.955 yen last Wednesday.
• The minutes from the Federal Reserve's last policy meeting due on Wednesday are the next key focus.
"The minutes could change the market's trend. They may have talked about reducing the Fed's balance sheet. Or the minutes may show some members are quite positive about rate hikes," said Yukio Ishizuki, senior strategist at Daiwa Securities.
"That sort of signal could fan speculation of a rate hike in March. If you look only at the firmness in recent U.S. economic data, there's no reason not to raise rates in March," he said.
• While markets continue to put the possibility of a rate hike by the Federal Reserve (Fed) in March at less than 20%, according to Investing.com’s Fed Rate Monitor Tool, Morgan Stanley suggested that there would be three main events can could likely change expectations in the run up to next month’s meeting.
Given that Yellen made no such indication in her semi-annual testimony to Congress last week, these analysts suggested that there will be “three opportunities” for the Fed to provide a clearer indication for a rate hike at the March 14-15 policy meeting:
1) The Fed will release the minutes from its January meeting on Wednesday, February 22.
2) Fed vice chairman Stanley Fischer is scheduled to speak in New York at the Chicago Booth School’s U.S. Monetary Policy Forum on March 3.
3) Fed chair Janet Yellen will also speak on March 3 at The Executives’ Club of Chicago.
• U.S. President Donald Trump on Monday named Lieutenant General Herbert Raymond McMaster as his new national security adviser, choosing a military officer known for speaking his mind and challenging his superiors.
• Speculators raised their bets on a rally in Brent crude oil prices to a record high last week, data from the InterContinental Exchange showed on Monday, mirroring growing optimism in the U.S. crude market.
ICE data showed money managers raised their net long holdings of Brent futures and options by 18,539 lots to a record 481,399 contracts, equivalent to 481 million barrels of oil, or around five days' worth of total global demand.
Optimism that the world's largest exporters of crude oil will not only stick to their pledge to reduce output in the first half of this year, but could potentially prolong those curbs, has driven a wave of money in the energy sector.
• Greece and its international lenders agreed on Monday to let teams of experts work out new reforms to Greek pensions, income tax and labour market that would allow Athens to eventually qualify for more cheap loans, euro zone officials said.
Reference: Reuters, Investing
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