Forex today was dominated by politics and expectations of Trump's tax reform plans, that only let the market down when announced despite sounding pretty good news for the US economy overall.
A number of the reforms were expected already and some of the benefits were priced into the dollar already and indeed stock prices. However, on the announcements, stocks came off as did the dollar and US yields. Trump administration officials called the blueprint one of the largest tax cuts and broadest overhauls of the tax system in history. “We want to move as fast as we can,” Steven T. Mnuchin, the Treasury secretary, said at an event in Washington as the White House planned an afternoon rollout of its principles for what it bills as the first overhaul of the tax code in three decades. “This bill is about creating economic growth and jobs.”
The DXY was better offered following the announcement of proposed tax reform and dropped below 99, paring most of its daily gains. 99.064 is up 0.28% on the day within a98.728 - 99.332 range. US yields were back into positive territory above the psychological 2.30% mark in the 10 years with a range of 2.3017 - 2.3485 but down 1.23% on the day so far at 2.3035 as of writing. For the US, first estimates of GDP Q1 Friday is key and durable goods tomorrow are the next major catalysts.
The euro was grabbed hold of the 1.09 handle on the tax announcements again after being in a range between 1.0856 - 1.0951 and falling to the lows in late London. The ECB is on the cards in European trade although no changes are expected. what will be interesting is the tone from the ECB around monetary policy in terms of future guidance in respect to the expected outcome of a Macron French election victory and whether that could change up the status quo in June after the result.
Sterling was higher against the greenback although still confined within a tight range a little over half a greenback while markets await domestic releases from the UK's calendar on Friday with the UK's preliminary Q1 GDP. Expectations are for an economy growing at just 0.4% Q/Q. USD/JPY was good two-way business on the back of US yields above 2.30% and as high as 2.3485 earlier in the shift. However, the USD/JPY gave up some its gains to close down 0.04%.
As for the antipodeans, the Aussie has on its knees on the back of its quarterly inflation figures with the Q1 CPI printing numbers that will allow the RBA to stay on hold potentially for the remainder of 2017 where expectations are for only modest growth. for the US session, that meant further supply until the turnaround in the greenback when yields dropped and DXY fell below 99.00. The kiwi was offered right down to below the 0.69 handle to 0.6871 lows before attempts back to 0.6900. The CAD and MXN were also keenly traded today on the back of Trump's plans to exit NAFTA harming the peso the most that dropped to 19.30 from 18.83. CAD hit a low of 1.3623 vs the greenback.
The Day ahead:
The BoJ is the main event. Analysts at Westpac offered their event outlooks:
"Australia: Q1 Import prices are forecasted to fall 0.4% due to a rebound in the AUD which is partially offset by higher oil prices. Q1 Export prices are forecasted to rise 6%, with upside risks, as the WCFI commodity price index rose 8.5% AUD in Q1. RBA Governor Lowe speaks at the Renminbi Global Cities Dinner.
Japan: The BOJ policy decision is almost certain to be on hold. Last Thursday, Kuroda said that accommodative policy is set to continue referencing still well below target inflation.
Europe: The ECB policy decision is also almost certain to be on hold. Focus will be on the June meeting when updated forecasts will be released.
US: Mar durable goods orders are expected to rise 1.5%. The investment trend remains poor, although since late 2016 nondefense ex-aircraft capital goods have started to recover."
Key US events:
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