Forex today: a busy and volatile day again, DXY to fresh 2.3 year lows

Forex today was busy again. 

The US dollar was down to YTD lows, losing  -0.61% on the day within a range of 88.558 - 89.004. 

With respect to US 10yr treasury yields, these initially rose to the highest since Jan 2014 at 2.94% in European trade before sliding to 2.89% in NY. Fed fund futures yields point to a rate hike in March while it looks questionable if the Fed will hike a further two or three times this year.  (The VIX over the 20 mark at one stage in the session. There was a high of 50 on Feb 6 leading to the stock market rout). 

Stocks were once again volatile on Wall Street, offered and then recovering into the close in the benchmarks - (Utilities have been leading gains while energy is down 1.2%).

As for data:

• Philadelphia Fed manufacturing survey Feb: 25.8 (est 21.8; previous 22.2)
• NY empire state manufacturing index Feb: 13.1 (est 18; previous 17.7)
• US initial jobless claims 10-Feb: 230k (est 228k; previous was revised 223k)
• Continuing jobless claims 3-Feb: 1942k (est 1925k; previous was revised 1927k)

EUR/USD entered NY + 0.26 % despite the US/German bond yield gap at a 10-month high on the back of U.S. inflation kicks in. The DAX was up 0.81% and the DXY was -0.38%. 1.2457 was the low in NY on the back of real money selling seen between 1.25/1.26 and profit taking ensued. The euro rose again on the back of renewed weakness in the DXY in NY that met fresh 15-month lows. Despite more inflationary data and higher 10-year yields,  EUR/USD moved to a high of 1.2502 at the close where the price was capped, drifting lower into the Asian handover.

After rising to an 11-day top of 1.4078 during the European's shift, GBP/USD extended the bid to 1.4104 in NY. Weakness in the dollar is helping the pound shrug off negative  Brexit press and headlines. However, one positive headline was run by the BBC: "EU 'removes transition punishment clause'".  We also heard from Bundesbank’s Wuermeling: "Brexit may harm major funding channels for EU (expects Brexit to ‘change London's role in finance’)."

For the cross, stuck within a  0.8930-0.8690 range, it ended the North American session at 0.8878 within a range of between 0.8899-0.8859. There were a lack of drivers for EUR/GBP perse and flows stemmed from weakness in the greenback and levels in cable and the euro. Eyes are on 0.8928 Jan 12 high and 0.8980 Nov 28 high.

USD/JPY was a highlight in the FX space on Thursday, making a fresh 15 month low in the NY closing hour despite an upside correction on the stock market.  106.50 had been taken out in Asia and then 106.18 was cleared in early London. USD/JPY went on to make further losses below the 61.8% of the 2016 rally and made a low of 106.03, (10 Nov 2016 low).

As for the antipodeans, the Aussie was offered at the start of the North American session and made a low of 0.7891 before recovering on dollar weakness and rallying through the hourly 21-SMA at 0.7933. There appears to be a correlation with stock prices and higher betas and the Aussie continued higher on the heels of the correction in the S&P/Dow late in NY before closing at 0.7945. The Kiwi ended the US session at  0.7390 within a range of 0.7368/94, losing its grip on the Asian session highs of 0.7411.

Key events ahead:

Analysts at Westpac noted that today is the peak day for lunar new year holidays in Asia, with Tokyo the only major regional market open. More highlights from Westpac:

"Mainland China is closed until Thursday 22nd.

Sterling often reacts to surprises in the UK retail sales report. Consensus for Jan sales ex-fuel is 2.4%yr.

The US data calendar is not as market-sensitive as the CPI report on Wed but still worth noting, especially Jan housing starts and Feb consumer sentiment  from the University of Michigan." 

Key events in US session

• DXY: how low can you go; 85 here we come?
• Fundamental recap: the latest news wires for the N. American session so far