USD Hits Tailspin
Talking Forex | May 17, 2017 11:06AM ET
Trump allegations have sent the USD into a spin as Treasuries are paid up. Losses suffered across the board, but JPY in the limelight, while the EUR continues higher and eyes 1.1200. Cable eyeing 1.3000, but more data tomorrow; retail sales. Oil prices testing the highs, CAD shorts pressured.
More USD selling through the day, with the pullback in US Treasury yields pressured further as equities succumb to the risk off sentiment generated by the latest allegations levelled at president Trump. The traditional safe havens have benefited, with the JPY the major destination as the USD rate takes out 112.00 on the downside. USD/CHF has moved in to the low 0.9800’s, but (CHF) gains here contained by assumed ‘smoothing operations’ by the SNB. While the political back-and-forth over the alleged memo hangs in the air, we expect the risk mood to remain sour, and this does not bode well for risk assets, yields and the USD.
Beyond this, key data out of Japan in the early part of the overnight session as we get the Q1 GDP reading, expected to show a 0.4% rise, which would translate into a yoy rate of 1.7% - up from 1.2%. Against this, CapEx is expected to fall however, but in light of the JPY gain seen today from the Trump/risk perspective, it will make for an interesting session ahead.
Very little of note this week on the US data schedule, even though the focus is very much elsewhere, but as a matter of course, we note the Philly Fed data tomorrow afternoon.
More UK data to give us further insight into the inflation impact hitting consumers Thursday morning as the Apr. retail sales figures fall due. Consensus is for a 1.0% rise after the 1.8% drop in March, and this has been reflected in the spending monitors from the BRC and CBI. Tuesday’s uptick in yoy CPI to 2.7% has been somewhat appeased by today’s reported average earnings (plus bonus), which rose from 2.3% to 2.4%, though ex- bonus slipped to 2.1%. This has given GBP some light reprieve at best, but we still could not get close to 1.3000 in the Cable rate despite the USD weakness. EUR/GBP is also proving resilient to the downside again, and this in spite of the strong resistance seen above 0.8600.
We also have the main jobs report in Australia to look to in the Asia session, where the market is looking for a modest rise over Apr – 5k the median forecast – with the rate set to stay the same at 5.9%. Earlier today we saw wage growth maintained at 1.9% for Q1 on a yoy basis, and this continues to point to the steady rate policy stance at the RBA. AUD/USD is grinding higher, but we expect selling to intensify the closer we get to 0.7500. NZD outperforming to a very modest degree.
For the CAD, today’s DoE report was supportive for Oil prices, but whether this is enough to send WTI back through USD50.00 is another matter. Even though the market has been selling the USD hard today, the CAD has been struggling to take advantage, but if we get some traction in Oil, then the CAD may get some momentum through the 1.3600. This is proving hard fought as yet. 1.3530 is the next level on the downside to watch, but heavy short CAD positioning is something to consider!
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