Forex today: plenty of events to muddle through, DXY down 0.11% and WTI down over 2.5%
|Forex today was a mixed bag, mostly following on from previous session's events but with a twist of some extra catalysts to keep us at the screens.
We have some large supply in the loonie, remarks from Saudi's prince about the price of oil, some argie-bargie between EU and UK leaders around Brexit negotiations, also budget concerns in the Whitehouse and, finally, some weakness in the greenback towards the end of the shift.
The day started out with some surprisingly strong UK data compared to the median forecasts at 54.0 vrs the outcome of 57.3, likely due to the weakness of the pound. This came after some Brexit jitters as PM Theresa May prepares to deal with the EU Commission, by stating she will be a "bloody difficult woman" during negotiations in response to Jean-Claude Juncker accusation of being "deluded" and when he was adding that is "more likely than not" that Brexit talks would fail.
The dollar has been bid early on over in London due to yesterday's weaker data outcomes following last week's poor GDP Q1 miss. However, the dollar flexed its muscles and soon took an early lead in the US session ahead of tomorrow's FOMC as markets again got back to business as usual, expecting a rate hike in June from the Fed and a hawkish statement tomorrow. This lead to a strong play against the EUR on the handover dow to 1.0887, although focus moved to USD/JPY that soon ran into gravity when the overnight gains were capped at 112.31 and a dip to 111.76 enabled the G7's to take advantage.
Sterling rallied 40 pips to 1.2940, the euro 27 pips to 1.0931, the Aussie 43 pips to 0.7556 and the Kiwi 24 pips to 0.6942 and the CAD, well that was another story. The Canadian dollar was beaten up again on matters related to Oil and without any domestic data, dominant drivers took a hold and USD/CAD rallied 59 pips to 1.3759 with the Saudi Prince suggesting Oil would be capped at $55.00 best case scenario. However, profit taking ensued as dollar weakness caught up and 90% of the rally was retarded leading into the close. The DXY was left down on the day by 0.09% and US 10-years down -1.32% and below the psychological 2.30% level at 2.2874% at the time of writing amid lower oil prices (WTI fell 2.6% to $48) and the US budget concerns.
The day ahead:
Analysts at Westpac offered the event risks for the day ahead as follows:
"NZ: Q1 labour data should see stronger employment growth, although the unemployment rate is expected to remain unchanged at 5.2% (consensus is 5.1%) given rising participation in the workforce.
Euro Area: Q1 GDP (advance) is out after a 0.4% reading in Q4. Growth has picked up over recent quarters, driven by robust domestic demand, which has broadened across industries and countries. Q1 partials indicate continuing growth and early national GDP estimates have printed 0.3% for France and 0.8% for Spain.
US: The FOMC policy decision is expected to be on hold. March’s hike was well telegraphed with the Fed confident that full employment is attained; job and income growth is continuing, and inflation is near enough to target. As such, we expect a follow-up move in June, with this meeting’s focus on further guidance on balance sheet normalisation timing. We also get pre-payrolls ADP employment as well as Apr ISM non-manufacturing."
Key events from the US session
- USD/CAD capped on recent 100 pip rally to fresh 15-month highs
- Russia cuts oil output in line with OPEC deal - BBG
- Saudi Prince: Government to decide on oil production ceiling
- WTI trades below $48 ahead of API report
- US Dollar drops to new session low near 98.80
- Trump: Government funding bill includes $21 billion increase for defense spending
- WH Budget Director: Eventual U.S. government shutdown may be inevitable if Democrats don't cooperate
- Le Pen: EU reform negotiations would start immediately if elected
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