Forex Today: dominated by US political uncertainties and a change of mood in the dollar

Ross J Burland FXStreet

Forex today was dominated by US political uncertainties, a weak dollar and a modest narrowing of the yield gaps across the G7's .The yen picked up the majority of the bid in that respect along with the euro.

There was some follow-through from last nights less dovish rhetoric from BoJ's Kuroda supporting a retracement to back below the 113 handle. The euro rallied to the highest levels since last Nov while the commodity currencies got a free ride on the dollar weakness as well.

The US economy is shaping up to be less appealing to global investors who are now looking offshore in such markets as the EM's. There are doubts over the ability of Wall Street to continually run on hot air and Trump's "make America great again" comes under scrutiny as political uncertainties get in the way. Data continues to let investors down and in stark contrast to what the Fed officials have been expecting, (except IP was the strongest in three years today).

Markets shrugged off the US IP data and instead reacted to offshore positives, such as euroland GDP and German ZEW. The dollar also got a hit on political uncertainties around Trump/Russian relations and poor US housing data that surprised to the downside. US yields dropped to test the 2.3% psychological level, a game changer for the dollar and the DXY is finishing the day around 0.80% lower for a YTD return so far of nearly -4%.

GBP/USD was good two-way business between 1.2866 and 1.2958. USD/JPY is down -0.65% between a range of 112.93-113.80% for today, currently testing 113.00 again. The Candian dollar (-0.35%), Aussie (+0.26%) and Kiwi (+0.10% weighed slightly by GDT price index miss -0.4% vs expectations) all got a boost from the commodity sector ramping up gains. Gold is also up on the day, +0.53%.

The day ahead:

While there are key events in Europe in UK jobs data dn EZ CPI, there is very little on the cards from Asia although some possibilities in second tier data as follows:

GMT	Event	Consensus	Previous
Tuesday, May 16
20:30	USD API Weekly Crude Oil Stock		-5.78M
22:45	NZD Producer Price Index - Input (QoQ)		1%
22:45	NZD Producer Price Index - Output (QoQ)		1.5%
23:50	JPY Machinery Orders (YoY)	0.6%	5.6%
23:50	JPY Machinery Orders (MoM)	2.1%	1.5%
Wednesday, May 17
n/a	PLN NBP Base rate	1.5%	1.5%
24h	NOK Constitution Day
00:30	AUD Westpac Consumer Confidence Index		99
00:30	AUD Westpac Consumer Confidence		-0.7%
01:30	AUD Wage Price Index (QoQ)	0.5%	0.5%
01:30	AUD Wage Price Index (YoY)	1.9%	1.9%
02:00	CNY FDI - Foreign Direct Investment (YTD) (YoY)		1%
04:30	JPY Industrial Production (YoY)		3.3%

Key notes from the US shift:

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.