Forex today: yen breaks higher in Asia handover on heightened trade war angst

Forex today was trading in the aftermath of the FOMC outcome with a comeback in the dollar, rising from 89.396 - 89.960 the high while US 10yr yields were sent lower between a range of 2.7971% - 2.8867% as investors jumped out of stocks on the Trump headlines.

One headline was that the New York Times was citing two people briefed on John Dowd resigning as Trump's top lawyer in the Mueller probe and the other was that the White House taking steps to restrict Chinese investment and put tariffs on $50B in Chinese imports for stealing technology. 

Analysts at Westpac explained that "US business leaders have been resisting the White House’s protectionist plans for months and many expressed their concern today so little wonder US stocks opened sharply lower and stayed heavy. This followed weakness in Asia and Europe, seemingly also unsettled by the US-driven trade tensions."

Yen strengthens past the 105 level for the first time since Nov 16

As for other currencies, USD/JPY was riding the dollar strength in late morning but hit the skids at 105.81 when the Chinese official's trade response headlines were coming out and the DJIA dropped from 24,465 to 23,943 over two hourly sticks before closing at 24,007. USD/JPY hit as low as 105.26 before selling resumed in early Asia, taking the pair down to as low as 104.63 as the trade wars intensify with Chinese headlines, where China plans reciprocal tariffs on US pork products tariffs on US steel, aluminium. The Yen strengthened past the 105 level for the first time since Nov 16.

The single unit started out on the bid in London and probed above 1.2380. The dollar picked up and sent the euro packing for a New York open of 1.2325. EUR/JPY was hit hard on the yen's advance in a sour risk mood and the euro drops to below the 1.23 handle momentarily, but tracking a partial recovery in stocks, there was a shortlived bounce to 1.2320 before risk soured again and the euro settled at 1.2305.

The pound rallied to a high of 1.4219 on the back of the February retail sales data beat that arrived +0.8% vs 0.4% consensus, and then the BoE leaving its policy unchanged while giving the nod to a rate increase in the near future, (7-2 vote v consensus 9-0, while support was unanimous for the very gradual path of withdrawal and maintaining their current asset purchasing). By the London close, sterling has lost its shine down to 1.4076 before ranging between there and the NY recovery high of 1.4118, weighed by risk-off.

The cross was ending the NY session at 0.8720 within a range 0.8741/0.8671 on Central Bank divergences again after falling as low as 0.8704 for a two-month low after the UK data. As far as EZ data went, the German composite PMI  for March came in at 55.4, (57.00 expected), from 57.6 prior. The German IFO arrived at 114.7for  March from 115.4. 

As for the antipodeans, the Kiwi failed at the converged 10 & 21-D SMAs in European trade and fell toward 0.7210 in NY and closing 0.7220. The Australian dollar walked into the US session around 0.7735 and heavy with bearish sessions overnight with an offer in the commodity sector as the dollar recovers and pressured by the risk flows in AUD/JPY. A low of 0.7686 was made and a slight recovery to the 0.77 handle for the close.

Key notes from US session:

Fundamental and political US wrap: Trump signs usd50 bln China tariffs

Key events ahead:

Analysts at Westpac offered their outlook for the next key events as follows:

• "Japan releases Feb national CPI data, with consensus for 1.5%yr overall but only 0.5%yr ex-fresh food and energy. Asia’s data calendar includes Singapore Feb CPI and Taiwan Feb industrial production.
• In the US it’s Feb data on durable goods orders and shipments (which could impact Q1 GDP estimates) plus Feb new home sales. There is more risk for CAD in Canada’s data calendar - Feb CPI and retail sales.
• The usual post-FOMC meeting Fedspeak cranks up in NY trade when we will hear from regional Fed presidents Bostic, Kashkari and Kaplan, plus Rosengren after the close."