Forex today: risk-off has Yen and gold outperforming

The FX space today was mixed in the sense that positive data wasn't all that positive for dollar bulls.

The key release from the US shift surrounded the US manufacturing sector.  Final Markit PMI came in slightly lower, at 53.3 from the flash estimate of 53.4, while the ISM index beat expectations by printing 57.2, down from January's 57.7. However, traders were more concerned about the performance on Wall street with the benchmarks all in the red and this weighed in the greenback in a risk-off environment with gold and the yen the beneficiaries of the sentiment.

The US 10yr treasury yields fell from 2.40% to 2.33%  while the US dollar index ended up by 0.2% on the session, supported by hawkish Fed speakers such as Harker advocating for three hikes in 2017. Fed futures are pricing in a 65% chance of a hike in June. The euro was better offered to 1.0642 the low in a 40 pip range. "What actually weighed on the common currency," explained Valeria Bednarik, chief analyst at FXStreet, "were comments from ECB Praet, who said that April's reduction of assets purchases doesn't signal the start of gradual reduction of QE." Gold rallied $10 bucks to 1253.90 the high while USD/JPY dropped from 111.60 to 110.86. Sterling fell below the 1.25 handle and the cross found demand at 0.8482 to 0.8558  on the session. The antipodeans were range bound and consolidating while commodities underperformed with the Aussie clutching onto the 0.76 handle after highs of 0.7643 and the kiwi kept between 0.6984 and 0.7022. 

The day ahead 

Analysts at Westpac noted a busy schedule ahead for the antipodeans with key events as follows: "NZ: The NZIER business opinion survey was at an index level of 26 in Q4, seeing confidence ease back a bit from a very high Q3 reading. However, the detail was generally firm. Inflation-related details will be of particular interest, pricing intentions previously very high.

Australia: The RBA policy decision is expected to be firmly on hold. The minutes of the March Board meeting were less upbeat than previous assessments. Upside risks from global growth and commodity prices were downplayed, with the Bank again sounding cautious about labour market conditions and household incomes. However, concerns about “a build- up of risks associated with the housing market” effectively rule out further cuts. Feb trade balance is expected to be a $2.8bn surplus after it narrowed to $1.3bn in Jan from $3.5bn in Dec, in part due to a spike in imports. Export earnings are expected to increase $1.0bn on a rise in iron ore prices and a rebound in gold while imports fall $550mn.

US: Feb trade balance is out following Jan’s drop to -$48.5bn USD – the largest deficit in 5 years. Today’s print will be a key topic ahead of Trump and Xi’s meeting on April 6 and 7. Fedspeak involves Tarullo in N.J on his second last day as a Fed Governor."

Key notes from US session

• Continued momentum in US: ISM manufacturing report - Nomura
• GBP/USD eyes key fibo support at 1.2430
• Fed's Harker: Fed should plan to raise interest rates twice more this year
• US Dollar index rises modesty on Monday, remains above 100.00
• GBP/JPY: worst decline in a month
• Key US data for the week ahead - Nomura
• The use of the Swiss franc as a reserve asset has diminished - BBH
• Gold holding steady around daily highs amid falling stock prices