Forex today: Dollar drifts higher despite lower yields

• The DXY drifting from 96.75 to a high of 96.97.
• 10-year yields lost ground from 2.14% to 2.09%.

Forex today was lacking a catalyst and the dollar was able to breath higher, with the DXY drifting from 96.75 to a high of 96.97. US markets were somewhat enthused by earnings season, with Citigroup performing and beating analyst's expectations which enabled stocks to close at record highs again. The US 2-year treasury yields dropped from 1.85% to 1.83%, while 10-year yields lost ground from 2.14% to 2.09% while expectations remain stead-fast on a rate cut from the Federal Reserve at the end of July, with the markets continuing to price in around 30bp of easing at the 31 July meeting. 

US data

As for US data, the New York Empire State Manufacturing Index climbed 12.9 points in July to 4.3. 

"This was significantly higher than market expectations which were weighted down by the sharp fall in the index the previous month. New orders are still falling, albeit at a slower pace. Shipment increased and unfilled orders and inventories both decreased. Of particular interest to the markets was the index for future business conditions which increased five points to 30.8, while the index for new orders was also positive indicating businesses are fairly optimistic about future conditions," analysts at ANZ explained. 

New Zealand CPI

The New Zealand Consumer Price Index increased by 0.6% q/q in Q2 which was in line market expectations. Annual inflation also picked up to 1.7% y/y from 1.5%, driven by higher petrol prices. "This print adds to the case that inflation pressures have stalled and more is needed from the RBNZ to get inflation back to 2%. It looks like Q2 will mark the peak in annual non-tradable inflation for some time. We’re expecting the RBNZ to cut the OCR in August and November," analysts at ANZ bank argued. 

Currency action

• As for currencies, on a mixed dollar, cable dropped half a buck, falling from 1.2576 to a low of 1.2510.
• The single unit crept lower from the 1.1280s double tops to a low of 1.1253. 
• USD/JPY stuck to a 30 pips range between 107.80 and 108.10.
• AUD/USD popped higher, despite the Chinese GDP data and was up 20 pips on the day with a look in at  0.7040. Instead, the focus was on Chinese IP and retail sales which impressed markets. 
• As for the Kiwi, the bird climbed to 0.6735 and printed a three-month high. 

Key notes from Wall Street

Wall Street scores marginally higher record closes

Key events in Asia ahead

The minutes of the RBA Board’s July meeting are due.