Forex today: mixed day, dollar up, starting off risk-on, profit taking then ensued
Forex today was yet again another mixed day, starting out risk-on, then risk-off.
Support building in the Huse of representatives fuelling a bid on the greenback, getting an extra boost from Trump's announcement that he is very very close to a decision on who will be his choice as the next Fed chair.
There is a lot of pressure on Congress to pass a tax reform bill by the end of the year and the House of Representatives will vote this Thursday with markets speculating that the fiscal hawks look willing to forgo concerns over deficit spending in order to set the stage for tax reform. The dollar is edging higher on such speculation that should such a bill be passed, that the Fed could find themselves behind the curve making for a foundation of further rate increases throughout 2018 and beyond.
However, the US yields could only consolidate today. On the back of Powell taking a big lead in the betting markets for next Fed's chair, as more of a dove, there was some short-covering in bonds. the US 10yr treasury yields ranged between 2.36% and 2.40, while 2yr yields initially made a nine-year high at 1.59% before slipping back to 1.56%. The Fed fund futures yields were firmer though with the market now pricing in a Fed rate hike in Dec by 99%.
As for the currencies, the euro was weaker across the board, (more robust against the pound) down to a low of 1.1724 with Spanish, Italian and Czech politics weighing on the sentiment for the eurozone project. EUR/GBP dropped from 0.8920 to 0.8886 before recovering back to the 0.89 handle. Sterling was two-way business again, initially bid on London on Spire/Mediclinic M&A news then softer on the back of BoE's Cunliffe again who remains uncertain about rate hikes - he previously said last week that rates hikes remain an "open question".
USD/JPY backed off from the post-Abe victory highs, unable to secure a foothold on the 114 handle on profit-taking and some last minute efforts from the bears in Wall Street with a slide in stocks after all three benchmarks made all-time highs on Friday.
As for the commodity bloc, USD/CAD was higher in a chop in WTI drifting lower ahead of BoC on Wednesday. The higher beta bloc such were struggling and Aussie was drifted below the 0.78 handle while Kiwi stuck to a tight rage, consolidating the 2% losses over NZ elections. Gold stays better bid on geopolitical tensions on Trump's executive order to arm bomber planes with nukes and to stay on 24hr alert-notice.
There no key risks events for Asia roday
Key notes from US session:
- US stocks hit fresh all-time highs and retreat, Nasdaq underperforms
- Wall Street pauses rally to record highs
- US Federal Budget: Deficit widens in FY 2017, more of the same ahead - Wells Fargo
- Catalonia: lengthy jail terms in event of formal declaration of independence - Scotiabank
- Gold recovers from 2-week lows and rises above $1280
- BoC expected to leave rates on hold at 1.00% on Wed - Rabobank
- PM May: no deal is better than a bad deal
- No signs of stabilization around NZD/USD yet – UOB
- BoE's Cunliffe: Rates will need to rise over next three years - Western Mail