Market Drivers for February 20, 2018
- USDJPY takes out 107.00
- RBA encouraged by consumer demand
- Nikkei -1.01% Dax 0.20%
- Oil $62/bbl
- Gold $1337/oz.
- Bitcoin $11460
Europe and Asia
EUR: ZEW 92.3 vs 93.9 forecast
North America
No Data
The dollar rebound continued in Asian and early European trade today as US yields pushed higher with the 10-year coming close to the psychologically key 3% mark.
The one exception to dollar strength was the Aussie which managed to hold its ground at the .7900 figure. The pair was boosted by upbeat RBA minutes which showed that monetary policymakers were encouraged by the rebound in consumer demand in Q4. The RBA remains resolutely neutral for now, but if the Australian economy can demonstrate wage growth, the central bank could shift into a tightening mode this year rather than next and the Aussie should then outperform as a result.
This week US Treasurys will be auctioned off. More than a quarter trillion of short-term securities will be on offer. Investors will be keeping a keen eye on the even, to see how strong the take-up will be. We noted yesterday that the US dollar was due for a short squeeze recovery rally and today’s price action is confirming that FX markets are primed for further dollar strength.
USD/JPY was the primary beneficiary of the move, taking out the 107.00 figure in early London trade as the pair now appears to have made a solid bottom at 105.50. The pair still remains in long term downtrend but could easily trade to 108.00 before encountering any serious resistance.
Both EURUSD and GBPUSD were lower as well, hitting 1.2350 and 1.3950 respectively and both could slide further as the day proceeds if the US corps extend the pro-dollar rally. There is no major US data on the docket today so flows will be driven by fixed income and equity markets for the rest of the day and dollar longs could test 1.2300 and 1.3900 in both pairs as shorts begin to cover.