Daily FX Wrap: A good day for the USD as wins seen across the board. USD/JPY takes out 114.00, but gains against the EUR strained. Cable holds 1.2900. AUD and CAD weakness persists.
We saw a very strong turn in the USD today, as fresh market reports on the US data run turned a little more positive than the muted response we saw in reaction to Friday’s jobs report. US Treasuries were hit as the mid dates largely led the move, with the 5yr now cleanly through 1.90% and 10yr piercing 2.40%.
As expected, USD/JPY led the charge, and by pm London time we saw the spot rate taking out 114.00, but we expect 115.00 to provide a sterner challenge as we get a sense that the market is running ahead of itself once again. The steady risk mood may add to JPY weakness, but this is proving modest as yet, given the respective gains in the cross rates.
USD gains have also been enough to see EUR/USD testing down into the initial support area at 1.0850-80, and price action from here is likely to be a slow grind at best as Euro zone proponents have been encouraged by the latest run of data, including the recent inflation stats.
The data schedule has been relatively light today, though we did see Mar US JOLTs rising to 5.743M, up from a revised (lower) 5.682M. However, IBD/TIPP optimism dipped to 51.3 vs 52.3 expected, and wholesale inventories rose by 0.2%, but the latter data can be viewed either way. Even less to note on Wednesday, with the usual run of Fed speakers, generally offering more of the same as is expected on the rate profile through 2017.
In Europe, we have French trade and industrial production to look to, but we expect more of a reaction to the Norwegian inflation data, seen rising modestly in the headline and core. This could arrest some of the NOK weakness, more so against the EUR, but the USD rate is currently testing 2017 highs. Swedish unemployment rate also due.
The ECB’s Draghi is due to speak in the Dutch parliament, so there may be some ‘interesting’ questioning to contend with.
Little of note in the overnight session ahead other than the Japanese leading index and coincident indicator, but the JPY perspective has been all but negligible in driving the spot and cross JPY pairs.
More weakness of note in the commodity currencies, but less so in the NZD, where Thursday’s RBNZ meeting is keeping trade here relatively neutral. In the meantime, AUD weakness at the hands of the USD has been augmented by the heavy copper prices, while oil prices cannot catch a break at the present time despite ongoing talk of a production cut extension. As a result, CAD is on the back foot again, with the USD rate pressing on the mid 1.3700’s. We still see strong resistance from 1.3800, but this is all about oil at present, with 10yr CAD tracking the US.
GBP weakness creeping back in if we look at the USD, but elsewhere, we are holding onto better levels, notably the EUR and CAD. Traders are all looking to Super Thursday, so currency counterparts driving trade to a larger degree. Expect more of the same on Wednesday, if not a little weaker on event risk jitters.