The FX space was a mixed bag today, with yields falling and the dollar unable to hold onto gains through the 100 handle in the DXY.
There were some rogue plays out there today, with the Aussie continuing with its northerly trajectory along with the kiwi and the CAD playing catch up in dramatic style. Iron ore picked up again from the lows seen earlier in the week, continuing to recover and support the Aussie. UK's PM May triggered Article 50 and USD/JPY was capped due to a turn in yields following German 10yr yields that lead the way dropping from 0.42% to 0.34%.
US yields drop but dollar holds in there
The benchmark US 10yr treasury yields fell from 2.43% to 2.38%. The European yields dropped in such a fashion due to the headlines suggesting that the ECB's message at its March 9 meeting has been overinterpreted as too hawkish. Meanwhile, Fed fund futures yields continued to price around a 60% chance of the next hike occurring in June, supporting the dollar to some extent. We had Fed-speakers hawking it up though, with Williams, Rosengren and Evans all citing the possibility of four hikes in total in 2017 - However, the markets are not buying it if price action is anything to go by. The US dollar was robust but did not exactly take off and settles below the 100 mark on the DXY. From the data, US pending home sales was higher to 5.5% in Feb vs 2.5% expected.
The day ahead:
Analysts at Westpac offered the key events for the day ahead:
"US: Fedspeak involves Kaplan participating in a moderated discussion at a capital markets summit in Washington D.C, Mester speaks at a risk conference co-hosted by the Chicago Fed, and Williams speaks at a community event in New York. Q4 GDP third estimate is out. Expectations are for a revision up to 2.0%yr from the second estimate of 1.9%yr.
Eurozone: Mar economic confidence and business climate survey indicators are released. Both measures rose over 2016 on stronger activity and remain around current cyclical highs but below previous cycle’s peaks.
Germany: Mar CPI last came in at 2.2%yr in line with the broader Eurozone. However, CPI ex energy printed 1.7%yr versus Eurozone core CPI of 0.9%yr. The reaction from German leaders has so far been tepid, but a further continuation in divergence could cause greater conflict with ECB policy."
Top stories from US session:
- Wall Street ambivalent amid mixed signals from FOMC members
- GBP/USD marching towards a positive daily close
- AUD/USD marches on with 0.7740/78 resistance up ahead through 0.77 handle
- Fed's Williams: Growing U.S. wealth-to-income ratio another reason to keep raising rates
- UK PM May: Looking for reciprocal arrangement with the European Union
- EUR/GBP headed to parity longer term?
- Intermarket VIX: a safe ride for risk-on markets, or is it?
- USD/JPY rises back toward 111.00 despite negative tone in Wall Street
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