Wed, Jun 26, 2019 @ 08:37 GMT
Movements in the forex markets are very limited today. Sterling dips mildly after PMI manufacturing missed expectation. Euro stays soft in general even though comments from policy makers should be Euro supportive. Aussie weakened earlier in the day on retail sales disappointment but no follow through selling is seen so far. Yen stays in tight range after uninspiring release of Tankan survey. Dollar on the other hand, trades mixed as markets await ISM indices and employment data later in the week, as well as FOMC minutes. In other markets, Gold continues to struggle in tight range around 1250. WTI crude oil is staying firm above 50 handle but can't extend gains so far.
The Japan Yen surges broadly today on risk aversion as last week's selloff in NASDAQ is spreading over. At the time of writing, DAX is trading down -0.9% while CAC is down -1.0%. FTSE is down a mere -0.1% as helped by renewed selling in Sterling. While DOW opens nearly flat, NASDAQ is losing another -1% in early trading. Elsewhere, the Pound is under some pressure again as it breaches last week's low against Euro and Yen. Dollar is also trading softer as despite firm expectation of an FOMC rate hike later in the week.
Dollar strengthens mildly today ahead of US president-elect Donald Trump's first post election press conference. Nonetheless, the strength is mainly seen against European majors. The dip in EUR/USD sent the dollar index above 102.50 briefly but there is no follow through buying in the greenback yet. US stock index futures also point to a flat open. The press conference will be held at 11am eastern time today and no specific topic was announced. Nonetheless, markets will be eagerly looking for details of Trump's expansive fiscal plans; The so called "Trump Rally" in stocks, yield and dollar lost much steam since the start of the year and will need fresh stimulus for the next moves.
Dollar trades mildly higher this week even though momentum is relatively week. US equities extended the record runs, with DOW, S&P 500 and NASDAQ closing at new records overnight. Treasury yields also recovered mildly. But there is little support to the greenback yet. The forex markets are generally mixed in consolidative mode, except that some extra weakness is seen in Euro, due to political jitters. Meanwhile, Australia Dollar is trading a touch softer after RBA minutes. Sterling, on the other hand, is firm as markets await inflation data from UK.
Dollar rebounds broadly today and maintain gains after stronger than expected inflation data. Headline PPI rose 0.3% mom and 2.2% yoy in February, comparing to prior month's 0.6% mom and 1.6% yoy, above consensus of 0.1% mom and 2.0% yoy. Core CPI rose 0.3% mom, 1.5% yoy, up from 0.4% mom and 1.2% yoy, versus consensus of 0.2% mom, 1.5% yoy. In particular, GBP/USD drops through 1.2133 support as Sterling is sold off broadly on news on Brexit and revival of Scexit. Meanwhile, Yen is trading as the strongest major currency with buying interest seen ahead of BoJ meeting.
Sterling and Dollar remain the two strongest currencies for the week. The greenback was supported by better than expected GDP data overnight, as well as Fed Chair Janet Yellen's upbeat comments. Positive sentiments in the US also sent DOW to record high at 23940.68, up 103.97 pts or 0.44%. NASDAQ, though, dropped -1.27% as investors dumped tech for bank stocks. That was in response to Fed Chair nominee Jerome Powell's hints on easing regulations. An important development to note is the rebound in treasury yields. 10 year yield closed up 0.038 at 2.376, keeping the near term bullish trend. The focus will now turn to Senate tax plan vote and PCE inflation data from US today.
Dollar and US equities came back from holiday stronger. The markets are looking through the geopolitical uncertainties in North Korea. Instead, they listened to comments from US Treasury Secretary Steven Mnuchin. Mnuchin conceded that completing tax reforms through Congress before August deadline was "highly aggressive to not realistic at this point". However, he noted that it would "probably delayed a bit" because of the healthcare. Meanwhile, he noted that the border-adjustment tax, seen as a sticking point among Republicans, could be excluded in the tax reform.
Sterling opens the week broadly lower as weighed down by comments from UK prime minister Theresa May. May emphasized in a televised interview that Brexit is about "getting the right relationship, not about keeping bits of membership." And she noted that the right relationship is about being "have control of our borders, control of our laws" while having the "best possible deal" for trading with EU. The comments indicated that control of immigration and law prevail access to the single markets. Meanwhile, May also pledged to set out "some more details in the coming weeks" about Brexit ahead of the March 31 deadline for triggering Article 50 for Brexit negotiations. GBP/USD dips through 1.2200 near term support to resume recent decline next key support level at 1.1946.
Markets are generally trading in risk averse mode after UK Prime Minister Theresa May's surprised call for snap election. That also adds to the backdrop of geopolitical tensions in North Korea and Syria. DJIA closed down -113.64 pts or -0.55% at 20523.28. S&P 500 lost -6.82pts or -0.29% to close at 2342.19. Nonetheless, both indices are still trying to draw support from 55 day EMA. In Asian session, China leads other Asian markets lower as SSE composite index drops -40 pts or -1.23% at the time of writing. Hong Kong HSI is losing -150 pts or -0.63%. Nikkei, however, recovers and is trading up 0.2% at the time of writing.
Dollar stays soft in early US session but selling momentum is limited so far. Indeed, the greenback has pared back some losses against Yen, which is the relatively stronger one. Released from US, trade deficit widened to USD -65.3b in November, larger than expectation of USD -61.5b. Exports rose 1.0% to USD 121.7b while imports rose 1.2% to USD 187.0b. Initial jobless claims dropped 10k to 265k in the week ended December 24, below expectation of 277k. Continuing claims rose 63k to 2.1m in the week ended December 17.
Trading is relatively subdued in the forex markets today as the quarter is heading for close. Euro turned into sideway trading but is set to end the week as the weakest major currency. In spite of more Brexit news, Sterling is just mixed for the week, up against Dollar, Europeans and Yen. Canadian dollar continues to be supported by firmness in oil price as WTI crude oil is holding on to 50 handle after brief retreat. Aussie follows as risk appetite returned to the markets. In other markets, European indices are mixed while US futures point to a flat open. Gold lost steam as Dollar rebounds and is heading back to 1240.
After suffering steep selloff yesterday on political uncertainties, Sterling stabilized and recovers mildly today. But focus will set to stay in the UK with CPI featured in the economic calendar. For the moment, GBP/USD and EUR/GBP are still holding in range. Thus, we're treating the selloff in the Pound as part of a corrective pattern first. Meanwhile, the calendar is getting busy today with Eurozone set to release GDP, industrial production as well as German ZEW economic sentiment. Some volatility could be seen in EUR/GBP. US will also release PPI later today which gives the market a glimpse of the inflation outlook, and as a prelude to Wednesday's CPI release. The greenback is generally staying in consolidation mode and needs fresh inspiration for a breakout.
Dollar rose mildly overnight but strength was so far limited. Comments from Fed officials were mixed and provided little guidance to the greenback. Meanwhile, Japanese Yen trades broadly lower on solid risk appetite and recovery in yields. DOW and S&P 500 surged to record close at 21528.99 and 2453.46 respectively. Nikkei followed and gains 0.81% to 20230.41. US 10 year yield recovered by adding 0.033 to 2.190, but it's still limited below 2.229 resistance. Similarly, dollar index is held below 97.77 resistance. EUR/USD is also staying above 1.1109 support. There is no change in Dollar's bearish trend yet.
Dollar recovered mildly overnight with treasury yield. The dollar index is now back at 101.25, comparing to this week's low at 100.26. 10 year yield closed at 2.389, comparing to this week's low at 2.313. 30 year yield closed 2.985 after touching 3.000, but recovered from this week's low at 2.913. Stocks were mixed as major indices were bounded in tight range with DJIA closed down -0.11% at 19804.72 and S&P 500 up 0.18% at 2271.89. Fed chair Janet Yellen said that it "makes sense" to gradually raise interest rate. And she warned that "waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road - either too much inflation, financial instability, or both." And more importantly, "in that scenario, we could be forced to raise interest rates rapidly, which in turn could push the economy into a new recession." Yellen also pledged to "closely follow" with economic policies and factor them into Fed's policies.
Dollar weakens broadly in early US session after disappointment from economic data. While the greenback is still trading at the strongest major currency for the week at the time of writing, it could end the week mixed. Headline CPI slowed to 2.2% yoy in April, down from 2.4% yoy, and missed expectation of 2.3% yoy. Core CPI slowed to 1.9% yoy, down from 2.0% yoy and missed expectation of 2.0% yoy. Headline retail sales rose 0.4%, below consensus of 0.6%. Ex-auto sales rose 0.2%, also below consensus of 0.5%. Elsewhere, Eurozone industrial production dropped -0.1% mom in March. German GDP rose 0.6% qoq in Q1. CPI was finalized at 2.0% yoy in April. Japan M2 rose 4.3% yoy in April, New Zealand business NZ manufacturing index dropped to 56.8 in April.
Risk aversion remains the main theme in the markets. Commodity currencies remain the weakest ones while Yen is staying firm. Dollar trades mildly higher but there is no follow through buying yet. RBNZ rate decision triggered a brief recovery in New Zealand Dollar but Kiwi is quickly back under pressure. Selloff in stocks seem to have stabilized though, with Nikkei hovering in tight range in red today, down around -0.15%. Gold is hovering between 1280/5 after yesterday's rally and is waiting for fresh inspiration. US-North Korea tension will remain the main focus today while data from UK and US will catch most attention.
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.
Dollar trades generally lower in quiet markets today. Economic data released this week so far are generally shrugged off by traders. The more important events are BoC and ECB meeting, as well as UK and US GDP. Waiting for the key events, traders seem to be spending their time on speculating who will US President Donald Trump nominate for the post of Fed chair. Current Fed chair Janet Yellen is still in the race and would provide status quo stability. But it's clear that Yellen is never a favorite of Trump. Fed Governor Jerome Powell is seen as the favorite by bookies, as he has knowledge of Fed and monetary policy. Stanford University economists John Taylor is so far the dark horse. Former Fed governor Kevin Warsh and White House economic advisor Gary Cohn are out of the race already
Dollar's selloff continues today in spite of positive job data. In particular, EUR/USD broke 1.0652 resistance. USD/JPY took the lead yesterday and broke 114.76 support. USD/CAD also broke 1.3080 key near term support. The dollar index also breached 55 days and breached 101 handle. Deeper decline is now in favor in the greenback in general, possibly except versus Sterling. US initial jobless claims rose 10k to 247k in the week ended January 7. Continuing claims dropped 16k to 2.1m in the week ended December 31. Import price index rose 0.4% mom in December.
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.
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