The forex space today may have lacked in data, but there were plenty of key developments on a macro scale from around the world leading into and during the US session.
The broader tone persists and the dollar remained on the backfoot. The DXY is down by 0.16% on the day and struggles to maintain the 97 handle in a continuation of the 99.62 5th May sell-off. US 10-years are up 0.62% having range traded between 2.2363 and 2.2537% with the highs still some way off from the psychological 2.3%.
Fed's Kaplan was hitting the wires calling for a reduction in the Fed's balance sheet to start later this year sighting three hikes as being "appropriate' for 2017." "Fed rate hikes should be gradual, patient," he said. From the EU, the euro got a boost on the back of comments coming from Germany's leader Merkel. She said the euro is "too weak for Germany" due to the ECB's policy. ECB's Weidmann said that the Bank doesn't care about state finances when exiting stimulus.
The euro was up at 1.1235 by +0.26% at the time of writing having rallied from 1.1162 to 1.1264 on the day. The cross also got a lift from 0.8597 to 0.8651 the high while sterling was down -0.29% and trading below the 1.30 handle as we head towards the June general elections with Labour catching up in the polls. UK PM May's election lead fell 14 points as Labour draws support.
The yen was gaining traction amidst dollar weakness and taking out the 111 handle vs the greenback with a low of 110.88 on the day from a high of 111.61. As for the commodity currencies, the Candian dollar was stronger within a range of 1.3485 and 1.3541. The Iraqi oil minister agreed with Saudi Arabia on extending OPEC cuts for 9 months and that boosted WTI and the loonie. WTI now trades between the 50 and 51 handle on spot. AUD/USD was higher +0.23% at 0.7467. RBA's Debelle said recently that cross currency basis may not be a sign of stress. The Kiwi was higher by 1.01%.
The day ahead
There are no significant releases in the Asian session.
Keynotes from US session
- A multi year downturn in the dollar in the making? - Nomura
- Iraqi OilMin: Agreed with Saudi Arabia on extending OPEC oil output cuts for further 9 months
- U.S. Treasuries: Yields are virtually flat on Monday
- Germany-U.S. yield spreads have narrowed in a EUR-supportive way - Scotiabank
- RBA's Debelle: Cross currency basis may not be sign of stress - Reuters
- Fed’s Kaplan: 3 rate hikes in 2017 is appropriate
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