Forex today: FOMC hangover session, dollar consolidates losses
The FOMC was a surprise to dollar bulls and today's sessions have been in a consolidation of the recent sell-off and subsequent drop in treasury yields while other Central Banks took up the focus. The BoJ, SNB and Norges Bank were a non-event and as widely expected held steady with no dramas. However, the BoE gave the markets something to think about with respect to the surprisingly hawkish outcome, despite the BoE on hold. The British 10-year gilt yields rose by 3 basis points on the day to 1.24% after the decision and publication of the minutes
Bank of England: A hawkish twist- Danske Bank
Meanwhile, the US 10yr treasury yields found some traction and rose back from below the 2.50% psychological mark from 2.48% to 2.54% while the Fed fund futures have started to factor in a June hike at around a 60% chance whereas yesterday markets were not factoring anything until September.
The US dollar index is flat in the session at the time of writing. The focus was on the pound. GBP/USD rallied from 1.2241 to 1.2378 on the back of the surprise hawkishness from the BoE. EUR/GBP has been good, two-way, business with an initial drop from 0.8758 down to 0.8668 before climbing back to current levels of 0.8716. The euro was rangebound between 1.0705 and 1.0770 after the first Dutch election results left the populists behind. The euro is also supported by less dovish signals from the ECB and an improving EZ economy. The yen has been consolidated in a 50 pip range on the 113 handle after the BoJ with downside risks to its outlook given the rhetoric delivered in Kuroda's presser.
US data included a solid JOLTS job openings that rose from 5501 to 5626 in Jan (5556 expected) while the Fed watch quit rate rose from 2.1% to 2.2%. US housing starts rose 3.0% in Feb against the 1.4% that was expected. Building permits dropped by 6.2% in the month of Feb vs the -1.9% that had been expected. The Philadelphia Fed business survey also dropped. The data arrived as 32.8 vs previous 43.3 but beating the 30.0 that was expected.
As for the antipodeans, the Aussie is drifting lower as we head into early Asia, subdued after yesterday's mixed messages from the labour market. The price has fallen back from the highs of 0.7720 down to 0.7663. With the Kiwi struggling after the recent Q4 2016 poor assessments and price falling from 0.7048 to 0.6968, AUD/NZD was attacking territory on the 1.10 handle with eyes on 1.1050. AUD/NZd made a high of 1.1020 but has since resumed the downside to 1.0988.
Day ahead
For the day ahead, markets are looking to wrap things up for the week and it looks relatively quiet out there. However, we do have some confidence numbers for NZ and the US. Analysts at Westpac offered key event risk as follows:
"NZ: consumer confidence (ANZ) and manufacturing PMI are typically not market movers.
China: Feb property prices (out Saturday) have previously shown momentum unwinding in tier-1 city price growth whereas tier-2 and tier-3 have maintained their growth pulse.
US: University of Michigan consumer sentiment last came in at 96.3 in Feb after reaching a decade high of 98.5 in January. What is particularly noticeable is the divergence between political groups. The expectations index is currently 55.5 among Democrats – a recession vs. 120.1 among Republicans – a boom."
Key notes from the US session:
- The upside risks to inflation have increased - BoE's Forbes
- US: Q1 GDP could be the weakest of the year - Wells Fargo
- Al-Falih: Oil cuts may be extended if necessary
- WTI testing $49 barrier amid Al-Falih comments
- USD/CAD: Fed hangover leaves CAD in a tight range, for now - Scotiabank
- USD/JPY bears eye 112.00-111.59 region
- Bank of England: A hawkish twist- Danske Bank
- Dutch election: Final results
- ECB's Praet: Underlying inflation pressures continue to remain subdued
- GBP/AUD: testing 1.61handle and reversed the sell-off on key fundamentals
- EUR/GBP: Risks still skewed on the upside despite the hawkish BoE - Danske Bank
- USD - where are all the bulls? - Rabobank