Summary: The US Dollar rebounded against it’s Rivals boosted by upbeat Producer Prices. Claims for Unemployment Benefits slumped to its lowest in almost 50 years. A day after Fed Officials indicated that they would keep current interest rates steady for 2019, US bond yields climbed.
The Dollar Index (USD/DXY) edged higher to close at 97.182, up 0.25%. Sterling slipped 0.35% to 1.3053 after the EU granted an extension of Brexit to October while PM May was nowhere near getting her deal through Parliament. USD/JPY jumped to 111.67 from 111.00, lifted by the higher US 10-year bond yield to 2.50% from 2.46% yesterday. The Aussie underperformed, dropping back to 0.7125 (0.7170). Wall Street stocks were little-changed.
US March Producer Prices beat forecasts with Headline PPI rising 0.6% (vs f/c 0.3%). Core PPI was up 0.3% against a forecast of 0.2%. US Weekly Jobless Claims dropped to 196,000, beating forecasts of 210,000. It was the lowest unemployment claim since 1969. German and French Final CPI data matched forecasts. UK RICS House Prices beat forecasts. China’s CPI and PPI matched expectations.
Federal Reserve Vice-Chairman Richard Clarida emphasized “patience” and that the economy is in a good place. St. Louis President and FOMC voting member, said there was no need for further rate rises.
- USD/JPY – the Dollar rebounded against the Yen to 111.68, up 0.60%. USD/JPY was boosted by the higher US 10-year bond yield, up 4 basis points to 2.50%. In contrast, Japan’s 10-year JGB yield was up one basis point to -0.06%. BOJ Governor Haruhiko Kuroda was crossing the wires saying the global economy was experiencing a slowdown.
- EUR/USD – The Euro slipped back off it’s highs weighed by the overall stronger US Dollar. EUR/USD closed at 1.1255 from 1.1272 yesterday. The Single currency rallied to an overnight and 3-week high of 1.12874, before easing at the NY close.
- GBP/USD – Sterling slipped following the EU’s move to grant an extension for Brexit to October 31. PM May appears no closer to get her deal through Parliament while the pressure mounts for her resignation. GBP/USD dropped to 1.3052 after trading to 1.3109 highs.
- AUD/USD – The Aussie slumped after it’s strong rally against the Greenback to 0.71708. The Battler lost momentum following the release of upbeat US data. AUD/USD closed at 0.7125.
On the Lookout: Following the ECB and Fed meeting outcomes, fresh catalysts will be needed to move the markets and get back some volatility. While the US Dollar rebounded on the upbeat US economic data and higher bond yields, the rally was limited. Long US Dollar market positioning, currently at multi-year highs, is the main impediment for further upside.
Data today starts off with China’s Trade Surplus (in both CNY and USD) and Foreign Direct Investment (year-to-date). A marked drop in China’s March trade surplus is expected. Australia sees the RBA’s Financial Stability Review. The RBA’s assessment of current financial conditions may provide insight to future monetary policy. Eurozone Industrial Production for March and the UK Conference Board’s Leading Index follow. The US reports its Preliminary University of Michigan Consumer Sentiment and its US Treasury Currency Report. IMF meetings begin this weekend in Washington, DC.
Trading Perspective: Look for consolidation today ahead of the data releases later and any possible market moving catalysts. Upbeat US data have supported Clarida’s assessment that the US economy is in a good place. US employment is still robust. Bond enthusiasts are not that confident that there will be any Fed rate cuts early in early 2020. Meantime market positioning remains long of US Dollar bets. With a decent correction still not about to get underway.
The China-US trade negotiations have faded in the background as the equity markets consolidate into the Earnings season. For Brexit, its “See you in October”, with some hoping that kicking the Brexit can further down the road will buy their politicians more time. PM May risks her leadership with more shouting for her resignation. Further consolidation in the currencies against the Greenback look likely.
- USD/JPY – continues to gyrate with the moves in the US bond yields. The 10-year yield bounced off 2.46% after the upbeat US data to 2.50%. The Dollar rallied 0.6% to close at 111.67, not far from its overnight high of 111.69. Immediate resistance lies at 111.70 followed by 112.00. There is near-term support found at 111.30 and 110.90. Look for consolidation with today’s likely range 111.30-111.80. Prefer to sell rallies from here.
- EUR/USD – The Euro slipped back to 1.1255 after testing the 1.1287 level again, failing to break higher. The overall stronger Greenback and a dovish ECB will prevent further gains today with immediate resistance at 1.1285 strong. The next resistance level is at 1.1325. Immediate support can be found at 1.1250 followed by 1.1220. Bear in mind that currently short Euro bets are at their largest since December 2016. Look for a likely range today of 1.1235-85. Prefer to buy any dips to 1.1235.
- GBP/USD – Sterling dropped after climbing to a high of 1.3108 following the EU’s granting a Brexit extension to October 31. Meantime UK data continues to surprise to the upside. UK RICS House Prices beat forecasts, falling 24% against an expected drop of 30%. GBP/USD has immediate support at 1.3030 followed by 1.2980. Immediate resistance can be found at 1.3080 followed by 1.3110. We may be back in a 1.30-1.32 band on the Pound. Look to buy dips with a likely range today of 1.3040-1.3090.
- AUD/USD – The Australian Dollar slipped back weighed by the stronger Greenback. Emerging Market currencies also lost ground versus the US Dollar. AUD/USD closed at 0.7125. Immediate support can be found at 0.7115 followed by 0.7085. Immediate resistance can be found at 0.7150 and 0.7180. Gold prices dropped by 1.2% overnight but Iron Ore prices remain robust. The Aussie speculative market is short of AUD bets. Look to buy dips with a likely range of 0.7110-60 range today.
Happy Friday and trading all.