Dollar dips after hitting March highs, hawkish Fed pause

Wall Street stocks slump, BOJ, Global PMIs up next

Summary:

The Dollar Index (DXY), which gauges the value of the Greenback against a basket of 6 major currencies, eased to 105.40 from 105.55. US bond yields were mixed. The 10-year rate climbed to 4.49% while the 2-year yield fell 6 basis points to 5.14%.

The US Federal Reserve maintained the Fed Funds rate between 5.25% and 5.5% but the FOMC signaled that the central bank would raise rates again before end-2023.

Across the Atlantic, the Bank of England kept its policy rate unchanged, at 5.25%. The BOE’s Monetary Policy Committee (MPC) voted 5-4 in favor of holding rates steady. The British Pound (GBP/USD) eased to 1.2290 from 1.2320 yesterday.

The Greenback rallied modestly against the Swiss Franc (USD/CHF) to 0.9000 from 0.8977 after the Swiss National Bank kept its policy rate unchanged, at 1.75%. An increase of 25 basis points was widely expected.

Against the yield sensitive Japanese Yen, the US Dollar tumbled to 147.47 from 148.43 yesterday. The Bank of Japan meets today on interest rates and is expected to maintain its dovish stance despite some traders looking for a policy shift.

US economic data released yesterday saw Existing Home Sales fall to 4.04 million from 4.07 million, and forecasts at 4.10 million. The Philly Fed Manufacturing Index plummeted to -13.5 from 12.0.

Wall Street stocks slumped. The DOW finished at 34,040 against yesterday’s 34,440 while the S&P 500 lost 1.7% to 4,327 (4,403). Other global share markets fell. Australia’s ASX 200 plummeted 2.59% to 6,972 against 7,129 yesterday.

The Euro (EUR/USD) rebounded from its lows at 1.0617 to finish at 1.0658 in New York, up modestly from 1.0643 yesterday. The Australian Dollar (AUD/USD) dipped 0.36% to 0.6415 (0.6427).

Against the Asian and Emerging Market Currencies the Greenback was mixed. The USD/CNH pair (Dollar-Offshore Chinese Yuan) dipped to 7.3130 (7.3175). Against the Singapore Dollar the Greenback (USD/SGD) was little changed, at 1.3665 from 1.3670.

Other economic data released yesterday saw the UK Public Sector Net Borrowing climb to GBP 1.08 billion, higher than forecasts of GBP 9.8 billion, and GBP 3.5 billion previously.

US Weekly Claims for Unemployment Benefits fell to 201K from 220K previously, and lower than estimates at 224K. Canada’s National House Price Index (m/m) rose 0.1% up from -0.1% previously.

• USD/JPY – In another roller coaster session, the Dollar tumbled to an overnight low at 147.32 against yesterday’s open at 148.43 ahead of today’s Bank of Japan meeting. The overnight high traded was 148.46. While the BOJ is widely expected to change policy, there is a chance the US central bank could drop its guidance where it won’t hesitate to take additional easing measures.
• GBP/USD – Sterling eased to 1.2290 in late New York from yesterday’s 1.2320 close. The Bank of England kept its policy rate unchanged. Slowing inflation in the UK was the main influence in the MPC’s decision. The GBP/USD pair hit an overnight low at 1.2229 while the overnight high traded was 1.2331.
• EUR/USD – The shared currency rebounded off its lows to finish at 1.0658, up modestly from 1.0643 yesterday. The Euro traded to an overnight high at 1.0673. In choppy trade, the overnight low recorded was 1.0617. Data released yesterday saw Eurozone Consumer Confidence slip to -18 from -16.
• AUD/USD – The Aussie Dollar eased modestly against the Greenback to 0.6415 against yesterday’s close at 0.6428. The AUD/USD pair traded to an overnight high at 0.6440 before easing at the close. The Aussie Battler tumbled to an overnight low at 0.6384 before stabilizing.

On the lookout:

Economic data releases pick up today with the release of Global Manufacturing and Services PMIs. New Zealand kicks off today’s data releases with its NZ August Trade Balance ro(f/c -NZD 0.9 billion from -NZD 1.107 billion – ACY Finlogix).

Australia follows with its Preliminary S&P Flash Manufacturing PMI for September (f/c 49.5 from 49.6 – ACY Finlogix), Australia September Flash Services PMI 46.5 from 47.8 – ACY Finlogix).

Japan follows with its National Core CPI (y/y f/c 3.0% from 3.1% - The UK starts off Europe with its UK GFK September Consumer Confidence Index (f/c -27 from -25 – ACY Finlogix).

Japan follows with its August Headline Inflation Rate (m/m f/c 0.6% from 0.4%; y/y f/c 3.3% from 3.3% - ACY Finlogix), Japanese August Core Inflation Rate (y/y f/c 3% from 3.1% - ACY Finlogix).

Japan also releases its Jibun Bank September Flash Manufacturing PMI (f/c 49.9 from 49.7 – ACY Finlogix), Jibun Bank September Services PMI (f/c 54 from 54.3 – ACY Finlogix).

The UK follows with its UK August Headline Retail Sales (m/m f/c 0.5% from -1.2%; y/y f/c -1.2% from -3.2% - ACY Finlogix); UK August Core Retail Sales (m/m f/c 0.6% from -1.4% - ACY Finlogix).

France follows with its Flash September Manufacturing PMI (f/c 46 from 46 – ACY Finlogix), France Services PMI (f/c 46 from 46 – ACY Finlogix).

Germany follows with its Flash September Manufacturing PMI (f/c 39.5 from 39.1 – ACY Finlogix) and German September Services PMI (f/c 47.2 from 47.3 – ACY Finlogix).

The Eurozone releases its September Manufacturing PMI (f/c 44 from 43.5 – ACY Finlogix), Eurozone September Services PMI (f/c 47.7 from 47.9 – ACY Finlogix).

The UK releases its UK September Manufacturing PMI (f/c 43 from 43 – ACY Finlogix), UK September Flash Services PMI (f/c 49.2 from 49.5 – ACY Finlogix).

The UK releases its September CBI Industrial Trends Orders (f/c -18 from -15 – ACY Finogix). Canada starts off North America with its Canadian July Retail Sales (m/m f/c 0.4% from 0.1%; y/y f/c 0.5% from -0.6% - ACY Finlogix).

The US rounds up today’s economic data releases with its US S&P Flash September Manufacturing PMI (f/c 48 from 47.9) and US S&P Flash Services PMI (f/c 50.6 from 50.5 – ACY Finlogix).

Trading perspective:

Expect more FX volatility today as we finish the week. Markets will focus on the release of global PMIs. The Dollar Index (DXY) dipped to 105.40 from 105.55 yesterday.

The Fed kept the Funds rate unchanged, between 5.25% and 5.5%, but signaled higher rates before the end of the year. This should keep a bid under the Greenback.

However, it is Friday and speculative long US Dollar positioning could be ripe for a pullback ahead of the weekend. Expect volatility to remain elevated today.

• USD/JPY – Against the Yen, the Dollar had a volatile session, finishing at 147.57 from yesterday’s 148.43. On the day, look for immediate resistance at 147.90, 148.20 and 148.50. Immediate support can be found at 147.30 (overnight low traded was 147.32). The next support level is found at 147.00 and 146.70. Look for more choppy trade in this currency pair, likely between 147.20-148.20. Trade the range.

Source: Finlogix.com

• EUR/USD – The shared currency edged higher to 1.0658 from yesterday’s close at 1.0643. On the day, look for immediate resistance at 1.0675 (overnight high traded was 1.0673). The next resistance level lies at 1.0700 followed by 1.0730. Immediate support can be found at 1.0620 and 1.0590. Look for more choppy trade today, likely between 1.0610-1.0710.
• AUD/USD – The Aussie Battler eased modestly against the Greenback to 0.6415 from 0.6428 yesterday. On the day look for immediate support at 0.6385 followed by 0.6355. Immediate resistance lies at 0.6440, 0.6470 and 0.6500. Look for more choppy trade in the AUD/USD pair, likely between 0.6410-0.6490. Prefer to sell Aussie rallies.
• GBP/USD – Sterling settled at 1.2290 against yesterday’s 1.2320. The British Pound has immediate support at 1.2260 and 1.2230. On the topside, immediate resistance lies at 1.2330, 1.2360 and 1.2390. Look for more choppy trade in the British currency, likely between 1.2230-1.2330. Trade the range, nice and wide.

Happy Friday and trading all. Have a top weekend ahead.