Forex today: a mixed and busy session, GBP, CAD and NZD stole the show

Forex today was volatile and mixed while US equities rebounded, US treasury yields rose while commodities were little changed as the dollar gains wilted away.

The dollar was mixed against the G10, massively outperformed by sterling with cable up to the highest level against the dollar since the referendum at 1.3943 and eyes on the 1.40 handle. The cross plummetted to a pip above the swing low of 0.8808. The mood is two-fold around the cross with those monitoring the Central Banks while Brexit and European politics come back into play this month. 

The London fix sent sterling higher yet again to penetrate 1.38 on Wednesday before the move was extended through the 1.39 handle to fresh highs of 1.3942 on stops. While there were no data fundamentals driving the moves today, the pound has been better bid since the reports that Spain and the Netherlands are willing to back a soft Brexit deal. Adding to the bullish case for sterling, the ECB's removal of accommodation talk was wheeled and BoE’s Saunders has been less dovish on the rate outlook and with a less sullen look at the UK economy.

As for the Dollar Index, DXY reached a fresh 3-year low at 90.11 before recovering to 90.81 the high for the session. However, the bid was capped and the dollar sank back to 90.22 and bounced from there to wrap up the session in NY a few pips below the recovery high of  90.73. US industrial data was 0.9% higher in December after a downwardly revised 0.1% decline in November. 

As for the euro, it started to recover the Asian lows of 1.2208 in European trade with the pair rallying to 1.2249 with a fade back to 1.2196 before NY picked up a bid off the familiar support to take the pair for a daily high of 1.2280. However, the dollar caught a late bid and the euro sold off to a session closing price of 1.2209. EUR/USD under some early pressure in Europe from EU December final CPI. This data came in below previous 1.5% yearly basis and was confirmed at 1.4% while annual core inflation, came in at 1.1%, matching November's reading.

The yen was sold off hard through the 111 handle to a reach a low of 111.27 vs the greenback, with USD/JPY extending the recovery lows from the previous day's low of 110.19. All eyes are o next week's BoJ meeting. 

As for the commodity currencies, all eyes are on the Aussie jobs data in Asia while the price action in AUD/USD was a heavy offer at 0.8023 on a strong bid from 0.7943. The Kiwi outperformed clearing the Asian high with stops taken out above 0.7300 and made a new trend high of 0.7331. The Loonie was traded around the expected BoC hike of 25bps ending the NY session at 1.2381.

Key events to come in Asia

Analysts at Westpac offered their outlook for the key events ahead:

"Following an outsized gain of 62k in November, Australia’s December labour force survey is eagerly anticipated. Annual employment growth looks to have overshot the forward indicators and so we anticipate a modest decline of 10k jobs in the month. The market is more optimistic, forecasting a further 15k gain. A positive outcome would make this the equal longest period without a decline in the survey’s history – matching the 15 months starting May 1993. Little change in the unemployment rate is anticipated in December, 5.5% from 5.4% in November.

A number of China data releases are also due. GDP growth is expected to remain strong at 6.7%yr in Q4, just a tick below the 6.8%yr pace reported for the nine months to September. The contributions to growth from investment and consumption will be a focus. Of the other releases, 70-city house prices and fixed asset investment are the most significant.

Ahead of next week’s ECB meeting, the market will also be attentive to Bundesbank and ECB speakers (Weidmann and Couere respectively). For the US, the calendar remains light: housing starts and permits and the Philadelphia Fed survey are due."

Key notes from US session

• Wall Street closes day with substantial gains
• Bank of Canada to move more slowly in the months ahead - Wells Fargo
• Fed's Kaplan: Need to move 'gradually, deliberately' to raise rates this year
• Fed's Evans: U.S. economy continues to do extremely well
• Crypto Today: Bleeding in crypto space continues, market cap drops below $500 billion
• Fed's Beige Book: Most Fed districts reported modest-to-moderate price growth since last report
• BoC's Wilkins: Consumer pricing likely goes up in case of end of NAFTA