Fundamental, political and economic wrap: dollar squashed by declining US yields

Despite strong labour data today, (a 45-year low in u.S. Jobless claims), the forex market today has seen another reversal in the dollar and US yields. The DXY has been moving to the downside within a range of between 89.635 - 90.235 and is currently down -0.32% at 89.7160 while the US 10-yrs are down -1.05% at 2.9189%, falling within a range of between 2.9024% -2.9463%. However, stocks rebounded as investors follow the money.

Here are some of the political and fundamental headlines on the day so far:

General:

• Bridgewater Associates, (world’s largest hedge) founder Ray Dalio says he sees a growing chance (70% chance) of a recession as the u.S. Enters a “pre-bubble stage”.
• Moody's: Mexico's US trade dependence amplifies risks from NAFTA renegotiations.
• Moody's: US steel industry's improved fortunes sustainable; outlook stable.
• Politics:
• Eu’s Juncker warns of financial market reaction to Italy & SPD votes.
• German Chancellor Merkel calls for Europe to step up to global challenges.
• Oil prices slump as dollar gets boost from hawkish Fed minutes.

Data picks:

• Canadian retail sales (m/m) dec: -0.8% (est 0.2%; prev r 0.3%).
• US initial jobless claims feb-17: 222k (est 230k; prev r 229k).
• Continuing jobless claims feb-10: 1.85m (est 1.930m; prev r 1.948m).
• Uk Q4 GDP revised lower on softer consumer-facing industry growth - (GBP/USD extends falls as UK GDP misses estimates).
• Drop in German IFO gauge echoes 'pessimism' in other surveys.

Central Banks:

• Fed's Bostic: things are continuing to look up, citing the GDP tracker.
• Fed's Bullard: too many rate hikes in 2018 could slow economy too much.
• Fed's Quarles: gradual us rate hikes 'appropriate'.
• Fed's Bostic: the Fed carefully calibrating return to a more normal policy.
• Fed’s Dudley: there’s a ‘speculative mania’ in the cryptocurrency market, (no comments on US economy, Monetary policy in Fed Dudley’s prepared remarks).
• CB’s Rimsevics appeals restrictions on central bank job - LTV.
• ECB account of 24-25 Jan monetary policy meeting.
• ECB officials say changing communication would be premature.

ECB minutes:

Some members wanted to drop easing bias regarding app in governing council communications, but council concluded such an adjustment would be premature.

• Ample degree of monetary stimulus was generally seen to be still needed.
• Eurozone expansion continuing to proceed at pace above current estimates.
• It was considered that quarterly real GDP growth could turn out higher than previously expected.
• Past appreciation of the euro had no significant negative impact on EZ external demand.
• Inflation path should be maintained even in less supportive monetary policy conditions.
• Members widely agreed there was reason to be increasingly confident about inflation path.
• Broad agreement that current mon pol stance broadly appropriate.
• Broad agreement that recent euro exchange rate volatility a source of uncertainty.
• Members agreed latest indicators point to further improvement in global activity, trade.
• Concerns expressed about overall status of international relations.
• Global economic expansion risks tilted to downside.
• US tax reform may have greater than expected impact on global growth in short-term.
• Communication on exchange rates, mon pol across major currency areas partly responsible for euro appreciation.
• Increased confidence that inflation will converge to governing council’s target.
• The remark made that without persistent positive contributions to food, energy price components, underlying inflation will need to be higher than pre-crisis average to meet inflation aim on a sustained basis.