Forex today: US dollar firms up and yields rise

The greenback was the top performer on the back strong US GDP data. At the same time, the euro was weaker with weaker than expected German inflation data. 

US Q4 GDP was revised higher, from 1.9% to 2.1% vs the 2.0% that had been expected while personal consumption was revised up from 3.0% to 3.5%. Subsequently, US 10yr treasury yields rallied from 2.37% to 2.42% while 2yr yields from 1.26% to 1.28%. DXY rallied from 99.90 to 100.50. USD/JPY was bid from 111.00 to 111.65, GBP/USD maintained demand despite dollar strength and rallied from 1.2402 until 1.2525. EUR/GBP dropped hard from 0.8665 to 0.8558 lows. AUD/USD dropped to 0.7649 lows after supply met European demand from 0.7654 to 0.7679 highs while the Kiwi gave back its gains to test the 0.7000 level making a low of 0.7003.

The day ahead

Analysts at Westpac offered their outlook for the day ahead in respect of key events:

"NZ: markets will watch the ANZ business confidence survey, both for headline readings (confidence is elevated but slipping) and inflation-related components. There's also Feb building permits.

Australia: Feb private sector credit is expected by Westpac to grow 0.4%.Credit to the private sector has been volatile of late, centred on business. Housing credit growth should be in line with Jan (0.55%) whilst business should post a small gain.

China: manufacturing PMI maintained a steady expansion level of 51.6 in Feb. Expansion is concentrated in large enterprises at 53.3 while the small business index is lower at 46.4.

Eurozone: Mar CPI is expected by the market to moderate to 1.8%yr from 2.0%yr in Feb as the boost from energy wanes. Core CPI has been much softer at 0.9%yr – expected to drop to 0.8%yr.

US: Feb PCE deflator is out, currently tracking below CPI. Headline PCE inflation rose to 1.9%yr in Jan, however, core PCE – the Fed’s preferred inflation gauge – has remained at 1.7%yr over recent months. The release comes with Feb personal expenditures and personal income. Both measures have shown moderate growth in contrast to the spike in consumer confidence. Fedspeak includes Dudley in a speech titled the “Importance of Financial Conditions in the Conduct of Monetary Policy” with audience Q&A, Kashkari participates in a discussion, and Bullard is interviewed."

Key events in US session:

Gold slips to daily low below 200-DMA
USD/JPY rises above 111.50 to weekly highs
NZD/USD eyes 0.6885 recent lows as dollar firms on rising yields
Sturgeon signs a letter formally asking for a second independence referendum - BBC
EUR/USD breaks below 1.0700 and falls to 2-week lows
AUD/USD headed to the April 2016 high at 0.7836?
China: The economy is stabilizing - BBH
IFOP poll: Macron to beat Le Pen in the 2nd round
US stock gain traction on upbeat GDP data, focus shifts to Fed speakers