Forex today was dominated by a resurgence in the greenback and risk appetite on Wall Street.
Stocks on Wall Street climbed and the NASDAQ and S&P were making fresh record highs. Markets are back to basics and focusing on the divergence between the Fed and other Central Banks that has given the greenback the edge again. Fed speakers were all hawkish today and the odds of a Fed hike in June have increased to over 80%.
"A couple of Fed speakers hit the wires, with Kansas George saying that the US economy is on track to grow at “a slightly above-trend rate,” and therefore gradual rate hikes are the right path. Rosengren centred on employment stating that further falls in the unemployment rate below 4%, would overheat the economy, prompting higher rates," explained noted Valeria Bednarik, chief analyst at FXStreet.
The Fear gauge is still down at 23-year lows, and while this may signify that the markets are perhaps being too complacent, the broader sentiment is dominating the flows of trade.
Subsequently, the DXY, at 99.61, is currently +0.56% from an opening price of 99.125 vs a closing price of 99.06 within a day's range of between 99.079 and 99.6888. US yields in the 10-years are up +0.31% between a range of 2.3759 and 2.4141%. EUR/USD is down -0.43% at 1.0877 within a range of 1.0864 and 1.0933 vs a previous close of 1.0924. USD/JPY is up +0.57% at 113.91 having scored a high of 114.33 from a low of 113.14.
Sterling has lost its momentum below the 1.30 handle. GBP/USD is currently flat on the day within the range of 1.2903 and 1.2961. EUR/GBP remains on the offer though, dropping from 0.8448 to test the 0.8400 round figure. Eyes are the BoE and whether more members will vote for a hike. Kristin Forbes cast a sole vote for a rate hike last month and sentiment is that Some other MPC members may not be far off from backing hikes as well.
On the commodity bloc, the Canadian dollar did not do so well today after closing the week on a firm note from just below the 1.38 handle. USD/CAD is up +0.26% at 1.3727 during the time of writing haven traded in a range of between 1.3671 and 1.3753. WTI dropped from $46.61 to $45.34. The Aussie remains out of favour with markets. It spent the day consolidating and walking lower in the recent supply down to 0.7328 from overnight markets in the retail sales disappointments. At 0.7341 currently, AUD/USD is down -0.62% within the range of 0.7329 and 0.7399. The kiwi is a slightly more neutral picture, down -0.19% on the day at 0.6895 within a tighter range of between 0.6880 and 0.6927.
The day ahead:
Key notes from the US session:
- US Commerce Sec. Ross: Dollar is not too strong, other currencies are too weak
- WTI struggles to hold above $46 ahead of API stock report
- Gold Intermarket: dominant forces pressuring gold below key technical level
- FED's Rosengren: U.S. unemployment drop below 4 pct would overheat economy, prompt higher rates
- Fed's George: Falling jobless rate means adjusting monetary policy is of 'paramount importance'
- US: Atlanta Fed's GDP forecast for Q2 at 3.6% on May 9, down from 4.2% on May 4.
- US Dollar: Bulls catch their breath above 99
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