Trump reportedly looking for to punishing currency manipulators, USD recovery hit

Going into the last day of the month end, we expect the usual erratic trade, but despite the portfolio balancing requirements suggesting USD demand, it was a report that president Trump is looking for ways to 'punish' currency manipulators which saw the greenback under pressure again in the afternoon. USD/JPY is naturally targeted in these instances, with inferences pointing to China, as well as Germany and Switzerland. 111.50-60 resistance had held well in the preceding USD recovery, in line with recent 'cap' in the 10yr US yield at 2.40%. Fed members on balance, continue to allude to the 2-3 rate hike profile for this year, maintaining data dependency consistent with the familiar FOMC line.

One of the more familiar month end moves in EUR/GBP has not played out as some would have expected, with the cross rate pushing through 0.8600, running into sizeable bids ahead of the figure initially, assumed to be real money demand out of Europe. This has added support to Cable, which found decent buying interest just ahead of 1.2400, before the combination of cross rate stop losses through 0.8600 and the USD move sent the spot rate through 1.2500. Few are likely to push too aggressively on the upside from here, as we await the initial process of negotiating exit bill before the major discussions on trade begin, but GBP short trimming clearly behind the larger moves on the week.

Political pundits point to Friday before we get more of a response - Euro wide - to Wednesday's triggering of Article 50, but there seems to be a clear resilience in the Pound near term, as some factor in a period of adjournment (grace) before the sparks start to fly. Interesting data out of the UK Friday in the form of Q4 business investment, where we get some substance to true sentiment on the exit from the EU. We also get the final reading of Q4 GDP as well as the latest current account balance.

After Germany's soft inflation stats today, the EU wide numbers will make for interesting reading, though ECB officials have already started reining in the market 'bullishness' in the rates markets. This has come in the wake of a recent run of positive data as well as the shift in policy stance that president Draghi communicated at the last press conference. French CPI due out ahead the composite release, as are the German retail sales and employment.

Ahead of Europe, we get a clutch of data out of Japan, top of which is the inflation read for Feb (nationwide) and Mar for Tokyo. Unemployment and industrial production accompany this, but the market will be looking for a pick up in national CPI to gauge the efficacy of current policy measures.

China PMIs overnight, but not from Caixin. As such, for the Antipodeans, the ANZ business confidence should have only a modest impact on the NZD, but in Australia, the private credit data could be influential given focus on housing. However, AUD has been on the rise on the back of base metals gains, with Copper in particular pushing for USD2.7000 again.

In the US, personal income and spending as well as core PCE in focus tomorrow, followed by Michigan sentiment later in the day.

Canadian GDP for Jan will give some colour on Q1 performance, but Oil related news saw the CAD making some ground across the board today as the Kuwaiti oil minister said that OPEC and non OPEC are discussing an extension to the production cut agreement. WTI is through USD50.00 as a result, with the backdrop of a lesser than expected build in inventory (both from DoE and API this week) adding to price support.