Thu, Dec 01, 2022 @ 14:01 GMT
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Market Overview

Dollar Extends Rally after Solid Job Data, Rate Speculations Continue

Dollar strengthens further in early US session after strong employment data. Initial jobless claims dropped -19k to 223k in the week ended February 25, below expectation of 245k. More importantly, that is the lowest level since March 1973 and indicates persistent healthiness in the job market. The four-week moving average dropped to 234.25k, down from 240.50k, hitting lowest since April 1973. Continuing claims rose 2k to 2.07m in the week ended February 18. The greenback is boosted by increasing speculations of a rate hike by Fed this month. Technically, the greenback took out near term resistance level against Sterling and Canadian Dollar earlier this week. While it's still limited below corresponding resistance against Euro and Yen, AUD/USD is following and broke a near term support level today.

Strong Risk Appetite Pushed Stocks to Record, Dollar Strengthened with Hesitation

Strong risk appetite boosted US markets to new record highs overnight. DJIA jumped 303.31 pts, or 1.46%, to close at 21115.55. S&P 500 rose 32.32 pts, or 1.37%, to close to 2395.96. NASDAQ also gained 78.59 pts, or 1.35%, to end at 5904.03. All three indices closed at records. Positive sentiments also pulled treasury yields higher with 10 year yield rose 0.105 to close at 2.463 and revived underlying bullishness. Dollar was boosted by increased speculation of March Fed hike as the Dollar index hitting at high at 101.97. The break of 101.76 in the dollar index confirmed resumption of recent rebound from 99.23. However, development in the currency markets doesn't warrant decisive momentum in the greenback yet. EUR/USD is held above 1.0493 support, AUD/USD above 0.7605 support. USD/CHF is limited below 1.0140 resistance and USD/JPY is held below 114.94 resistance. The strength in the greenback is more apparent in GBP/USD and USD/CAD only. More evidence is needed to confirm bullishness in the greenback.

Dollar Extends Rally as Positive Sentiments Continue

Dollar continues to ride on speculation of March rate hike and positive response to president Donald Trumps' Congress address. Released from US, personal income rose 0.4% in January while spending rose 0.2%. Headline PCE accelerated to 1.9% yoy but missed expectation of 2.0% yoy. Core PCE was unchanged at 1.7% Yoy, below expectation of 1.8% yoy. ISM manufacturing will be a key piece of data to look at and strong reading could give Dollar's rally more fuel. Fed will also release Beige Book economic report in the afternoon. For the time being, the greenback will like stay firm. Technically, 1.0493 support in EUR/USD and 114.94 resistance in USD/JPY should be watched.

Dollar Lifted by Trump Optimism and Fed Speculations

Dollar strengthens broadly as markets took US president Donald Trump's address to Congress positively. Dollar index is back at 101.60, comparing to yesterday's low at 100.78 and is having key near term resistance at 101.79 in sight. Strength in greenback is most notable against Canadian Dollar, which was dragged down by oil price yesterday. On the other hand, the Japanese Yen is sold off broadly today on return to risk appetite. Asian indices are generally higher with Nikkei gaining nearly 1.5% at the time of writing. Focus will now turn to economic data from you, including personal income and spending, and ISM manufacturing, to solidify the strength in Dollar's rebound.

Dollar Stays Mixed and Trump Awaited

Dollar continues to trade mixed in early US session. The greenback is seen weaker against European majors and Yen. Nonetheless, Dollar trades mildly up against Canadian Dollar thanks to pull back in oil price. Released from US, Q4 GDP growth was unrevised at 1.9% annualized in Q4, below expectation of 2.1%. GDP price index was revised lower to 2.1%. Trade deficit widened to USD -69.2b in January. Wholesale inventories dropped -0.1% in January. From Canada, IPPI rose 0.4% mom in January while RMPI rose 1.9% mom. Focus will turn to US president Donald Trump's address to Congress.

Dollar Unmoved by Increased March Hike Pricing

The talk of a March rate hike by Fed is heating up this week. It's reported that based on Bloomberg's world interest rate probability tool, the markets are pricing over 50% chance for a March hike. Sharply higher than around 34% a week ago. This is seen as a reaction to recent hawkish comments from Fed officials. However, reactions in markets in general are not that apparent. US equities stayed cautious with DJIA closing up 15.68 pts or 0.08% at 20837.44. S&P 500 rose 2.41 pts or 0.1% to close at 2369.75. Treasury yields recovered with 10 year yield closing up 0.052 at 2.369, but stays near to bottom of recent range. Dollar index also rose slightly, back above 101 handle but stays far enough from 101.79 near term resistance. Dollar is also trading mixed, down against Euro and Aussie for the week.

Dollar Mixed as Markets Look Past Durable Orders

Dollar continues to trade mixed after weaker than expected data. Durable goods orders grew 1.8% in January, below expectation of 1.9%. Ex-transport orders dropped -0.2% versus expectation of 0.5% growth. Traders are staying cautious ahead of the highly anticipated address to Congress by US president Donald Trump tomorrow. Trump would likely provide details on dismantling the Affordable Care Act, or so-called Obamacare. However, market's attention will be on other economic related issues. That include the long-awaited tax reform that boosted stocks to new records highs. Traders started to reposition late last week as seen in the divergence in major indices. Also the greenback pull backed back following sharp fall in yields. The greenback could be vulnerable to selloff if Trump fails to live up to expectations again.

Sterling Dips as PM May Preparing for Scottish Referendum Call

Sterling dips notably against other major currencies in an other wise rather quiet Asian session. Selloff in the Pound is seen as a reaction to news that Prime Minister May is preparing for Scotland to call for another independence referendum. And that would come as May triggers the Article 50 for Brexit negotiation with EU by the end of March. It's reported that May could agree to the vote on condition that it happens after completing the Brexit process. While Sterling weakens broadly, it's so far kept well in range against Dollar and Euro. The larger move is seen in GBP/JPY which is heading back to 138.53 support.

Yen Jumped on Falling Yields and Risk Aversion, Euro Suffered

Yield treasury yield suffered sharp selloff on Friday. 30 year yield closed below 3.000 handle at 2.955, down -0.068. 10 year yield also lost -0.071 to close at 2.317 and carried near term bearish implications. Markets are getting increasing dissatisfied on the lack of progress from US president Donald Trump's administration regarding fiscal stimulus. There was no detail on the so called "phenomenal" tax reform yet. Instead, Trump just continued his attack on media, intelligence agencies and other countries like China. There were talks that Trump could eventually deliver virtually no fiscal stimulus that has an impact of this year's growth. All eyes will turn to his address to Congress on February 28. And reactions could be even more apparent if Trump fails to deliver anything concrete. Dollar also suffered and ended the week mixed.

CAD Surges on Strong Inflation Reading

Canadian dollar surges in early US session after stronger than expected inflation data. Headline CPI jumped 0.9% mom and 2.1% yoy in January. That's way above expectation of 0.3% mom, 1.6% yoy. Meanwhile, BoC CPI core also rose 0.5% mom and pushed the annual rate higher to 1.7% yoy. The Loonie was mildly troubled by WTI crude oil's breakout failure. But much support is seen from the inflation reading. Released earlier today, UK BBA mortgage approvals rose to 44.7k in January.

Euro Recovers Mildly in Directionless Markets

Euro recovers mildly today but remains the second weakest major currency for the week, next to Swiss Franc. Dollar, on the other hand, lost momentum again. Dollar index was repelled from 101.96 resistance and is back below 101 handle. Overall, the financial markets are losing their directions. DJIA closed at another record high overnight, up 34.72 pts or 0.17%, at 20810.32. S&P 500 jumped to new high at 2368.26 but pared gains to close at 2363.81, just up 0.99 pts, or 0.04%. NASDAQ dropped for the second straight days and closed down -25.12 pts, or 0.43%. Treasury yields closed lower as recent sideway consolidation extends. Gold, however, extended recent rise to as high as 1254.8 so far today. WTI failed to break out from recent range and gyrates lower to 54.24.

Dollar Drifts Lower after Treasury Mnuchin’s Comments

Dollar drifts lower in early US session after comments from US treasury secretary Steve Mnuchin. Regarding the long awaited "phenomenal" tax overhaul, Mnuchin just said that the administration is "primarily focused on a middle income tax cut and a simplification for business." He also reiterated that "any tax cuts for the wealthy getting canceled out with closed loopholes." Mnuchin is aiming to pass the reform before Congress' recess in August. However, some analysts doubt the possibility of this due to the complex agenda of Congress. Regarding the economy, he noted that Trump's administration is aiming for "sustainable growth of 3% or more". And the he's exploring 50- and 100-year debt with "very slight premium".

Dollar Shrugged Off Hawkish FOMC Minutes

Dollar was unmoved by the hawkish FOMC minutes released overnight and struggles to extend gain. EUR/USD's break of 1.0520 minor support yesterday is seen as a sign of decline resumption. However, GBP/USD, USD/JPY, USD/CAD and AUD/USD are all held in established range. Similarly, the dollar index lost momentum ahead of near term resistance level at 101.76. The move in EUR/USD was more due to weakness in the common currency in general, due to political uncertainties. In other markets, DJIA closed at new record high at 20775.60, up 0.16%. But S&P 500 and NASDAQ closed slightly down by -0.11% and -0.09% respectively. 10 year yield continue to gyrate in sideway consolidation pattern and closed down -0.009 at 2.418. Gold and oil are both staying in tight range.

Dollar Higher Against Euro, Lower Vs Yen, FOMC Minutes Next

Dollar strengthens against European majors and Canadian Dollar today. But the greenback weakens against commodity currencies and Yen. Focus is turning to FOMC minutes. The minutes could reveal that FOMC members are more comfortable on the path of growth and inflation. But there's probably nothing new other than that. In particular, some FOMC members have openly noted that fiscal policies, due to the lack of details, were not taken into account in their decisions and projections. We'd view the March FOMC meeting, with new economic projections, as a much more important one. Released in US session, Canada retail sales dropped -0.5% mom in December. Ex-auto sales dropped -0.3% mom.

Stocks Hit New Records, Dollar Limited by Yields Again

US indices closed at new record highs again as led by defense and energy sectors. In particular, WTI crude oil surged to as high as 54.68 and is showing sign of range breakout. That helped lift DJIA up 118.95 or 0.58% to close at 20743.00. S&P 500 gained 14.22 pts or 0.60% to close at 2365.38. NASDAQ also rose 27.37 pts or 0.47% to close at 5865.95. Dollar index was lifted by hawkish comments from Fed officials and reached as high as 101.60. However, the index lost momentum ahead of 101.76 near term resistance.

Dollar Surges Broadly as Hawkish Fedspeaks Finally Having an Effect

Dollar surges broadly today as US markets are back from holiday. There is finally some support from hawkish Fedspeaks. Philadelphia Fed president Patrick Harker is quoted today saying that he would "not take March off the table" for rate hike. He maintained that three hikes this year is "appropriate" depending on developments. Cleveland Fed president Loretta Mester said the trend in inflation is "moving up". And, she's "comfortable" that inflation is moving towards Fed's target. And, it the economy keep on with the currency way, she's "comfortable" for a rate hike at this point. Technically, EUR/USD is heading back to 1.0520 temporary low and break would drag the pair lower. That would correspond to 101.60 resistance in dollar index.

Aussie Range Round Despite Upbeat RBA Minutes

Aussie stays in right range against the greenback despite the relatively update RBA minutes. The minutes showed that the central bank expected recovery in the global economy to list resources exports. And, "the higher terms of trade represented a boost to national income, which provided some upside risks to the domestic forecasts." 2017 is forecast to be a good year with 3% GDP growth, "above estimates of potential growth over the rest of the forecast period." Outside of mining, RBA expected that the rise in building approvals over the last year suggested that "non-residential building construction would contribute to GDP growth towards the latter part of the forecast period." In addition, RBA also predicted that "recent pick-up in global inflationary pressures could flow through to domestic inflation by more than expected". Meanwhile, RBA sounded more confident that "Chinese growth would remain resilient in 2017." But it also warned that "China continued to be one of the main sources of uncertainty for the Australian economy."

Forex Markets Tread Water With Focus on FOMC Minutes and Trump

The forex markets are generally staying in range as another week starts. FOMC minutes will be the main focus of the week. Recent comments from Fed officials were generally hawkish, maintaining the general view of three rate hikes this year. And there are some comments that raised the probability of a March hike mildly. The markets will look into the minutes of January 31 - February 1 meeting to confirm that it's a consensus among FOMC minutes. Meanwhile, it's generally expressed that fiscal policies were not taken into account in Fed's last projections, due to lack of details available. US president Donald Trump has promised to deliver "phenomenal" tax reforms within two or three weeks. And it's about time for Trump to deliver. And the announcement of Trump's tax overhaul could overwhelm the markets.

Sentiments Dragged Down by Rising Frexit Risk

While US equities surged to new record high last week, other markets didn't follow. Dollar ended mixed in spite of a chorus of hawkish comments from Fed officials, including chair Janet Yellen. A batch of stronger than expected data also provided little support to the greenback. Instead, Dollar was dragged down by treasury yields, which failed to break out from recent range and reversed during the week. Political uncertainties could be a major factor in triggering safe haven flows to US bonds. And such sentiment could also be seen in the broad based weakness in Euro, which closed as the second weakest major currency next to Sterling. Swiss Franc decouple from Euro and Sterling and ended as the second strongest currency. And overall risk aversion on European situation could be the factor in driving up the Japanese Yen, which ended as the strongest major currency.

Sterling Tumbles on Retail Sales Miss, Yen Jumps

Sterling comes under much selling pressure today after disappointing data. Retail sales unexpectedly dropped -0.3% mom in January versus expectation of 1.0% rise. The pound is set to end the week as the weakest major currency after a string of weak data. That includes the CPI miss released on Tuesday and wage growth miss released on Wednesday. These data dampened speculations of a BoE rate hike by year end. In addition to that, the impact of Sterling's depreciation since last year's Brexit referendum appears to be fading. And there are a lot of uncertainties ahead as prime minister Theresa May would trigger Article 50 for Brexit by the end of next month.