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Forex today: political turmoil in White House and data send dollar off a cliff

Forex today was giving us more concerns about the internal affairs of the White House and the revolving door of top personnel with headlines that Secretary of State Tillerson had been fired. 

The DXY  traded on the offer between 89.591 - 90.112 while the US 10yr treasury yield fell from 2.88% to 2.84% following the US CPI data and the political turmoil headlines, while 2yr yields held steady at 2.25%. The Fed fund futures continued to price three more hikes by end-2018 (and another hike in 2019). CPI showed headline consumer prices rising at an annualized 2.2% during February and 0.2% inter-month, but, taking out food and energy costs, CPI only rose 1.8% year/on year and by just 0.2% on a monthly basis vs 0.3% prior. 

As for other currencies, EUR/USD entered the US open  -0.04% and rose from 1.2340 to 1.2400, responding mostly to the CPI data and the Tillerson headlines after an initial soft spell in the European markets weighed by funding costs, although on the 1.23 handle and well above the 55DMA at 1.2258 key support area. The euro made a session high of 1.2407 for a handover just below the handle at 1.2390 with the  RSIs posing a bullish bias while the 10 & 21-DSMAs comes as supports above the daily cloud.

GBP/USD was subdued below the 1.39 handle in London, supported on dips to 1.3880 while awaiting Hammond's half-yearly update on the UK public finances. Cable moved over to NY traders looking better bid and traded within a range of 1.3994-1.3887, passed onto early Asia at 1.3973 after Hammond offered a more upbeat assessment of the UK economy than what has been reflected in the price and headlines in the media. 

EUR/GBP was stuck in a 20 pip range in the European markets between  0.8865-0.8885 and ended NY at 0.8867 and 10 pips below the previous session's close on the previous day.  The BOEWATCH us pricing in 2 rate hikes for 2018; +25bp in May, 1 more in Nov/Dec while the ECB looks to be on hold, potentially tweaking its language towards the fall and setting up to act by the end of the year. 

USD/JPY bids arrived early in European trade as the yen longs get squeezed in the absence of fresh concerns in markets and within an improved risk environment. However, there was a dip to 106.88 before a pick up to 107.27 the high. The dollar sell-off took the pair down to 106.45 for the NY close after that minor intraday fresh high on 107. 

As for the antipodeans, NZD/USD was extending the upside recovery and crossed the descending trendline on the 0.73 handle, poised for higher levels still and was the best performer overnight. The Aussie elicited support pre-0.7856 after retreating from 0.7885 in London in a choppy European session and opened the US shift at 0.7875 where bulls bought the early dip on the back of a decline in US yields and that sell-off in the greenback taking the pair as high as 0.7898 off the bat. However, AUD/JPY was a weight and the pair closed back around 0.7875.

 Key notes from US session:

Funda wrap: White House's revolving door sends dollar and Tillerson packing

Key events ahead:

Analysts at Westpac offered their outlook for the forthcoming key events as follows: "China releases combined Jan-Feb data on industrial production, retail sales and investment at 1pm Syd. Industrial production will be watched most closely and occasionally has a small impact on AUD.

The US data highlight is February retail sales. January’s report was unexpectedly weak (-0.3% overall), with December revised lower, but this followed a strong few months. Consensus this month is 0.3% m/m overall, 0.4% for the “control group” which excludes food, energy and building materials."

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Ross J Burland

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.

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