Forex today: risk sentiment back in vogue
The US market was on fire today with the stock market jumping through hoops at the off with a bullish gap of 1.4% to print new record highs again on the back of optimism in the US economy from Fed officials this week. Trump's address was also very bullish and backed the bid in the US dollar. The US dollar index is 0.4% higher just ahead of the close today. US 10yr yields rose from 2.40% to 2.47% overnight due to the hawkish comments coming from both Williams and Dudley that puts March back on the map for a Fed hike. The April contract now at 0.825% implying around an 80% chance of a rate hike in March (24 hours ago it was at 50%). However, in respect to the US economy, and for what it is worth, the Atlanta Fed GDPNow estimate for 1Q fell below 2% despite the strong manufacturing data.
FX space mixed:
The FX space was mixed with the euro reacting overnight in Europe to the German CPI data coming stronger than expected. The euro rallied to the 1.0570 territories from 1.0514 while the Yen slipped back above the 114 handle vrs the dollar. However, it was the antipodeans that stole the show with the Aussie propped up with a rise in copper and gold, sticking to its recent ranges despite dollar strength with a look in at the 0.77 handle. The kiwi recovered well towards the close as well to 0.7168.
Economic data:
The data in Europe offered a year on year rise in German CPI to 2.2% from 1.9& in Febuarary on the back of lower energy prices. From the US, the calendar was busy with the US personal income report for Jan first up. This came in with income stronger at 0.4% vs 0.3% while the spending was a touch weaker at 0.2% vs 0.3% expected. The core PCE deflator came in at an unchanged 1.7% for the year. ISM manufacturing gave a decent print of 57.7 vs 56.2. The Fed’s Beige Book was beating the same drum with a “modest to moderate” expansion.
The day ahead:
In Asia, markets focus will stay with Australia's trade account. This is expected to post a surplus of $3.9bn In December. Then, ahead from the Eurozone we look to Jan unemployment while we await more Fedspeak in the US session that will include Kaplan before Brainard speaking at Harvard on the economic outlook and monetary policy with an audience and a Q/A session.
Main topics in U.S. session:
- RBNZ's Wheeler: House price inflation has moderated, but too early to say whether this will continue
- US dollar index finds resistance below 102.00 and retreats
- Gold intermarket: Gold bugs riding the bullish waves, for now unless DXY gives in
- UK House of Lords pass Brexit Bill amendment to force govt to protect EU citizens rights
- Fed's Beige Book: A few districts reported some pickup in the pace of wage growth
- Fed's Kaplan: Should raise rates in a 'very patient way'
- WTI leaps to highs above $54.00 post-EIA