Forex today: dollar and US yields bounce back
The US dollar was making a come back at the start of the week, likely supported by the renewed optimism and confidence in the Fed and their bullish outlook for the US economy and path of normalisation of interest rates. Yellen closed the week off last week with a cautious hawkish tone leaving March's FOMC meeting open to a rate hike with the market now pricing for a March hike at 95%. The US dollar index is 0.2% higher before the close today and US 10yr treasury yields have bounced up from 2.46% to 2.50% while 2yr yields rebounded from 1.29% to 1.31%.
In respect of the data, the durable goods orders in Jan were revised higher from 1.8% to 2.0% while the factory orders rose 1.2% in Jan (vs 1.0% expected). In the FX space, the dollar ruled the waves, taking the euro off its perch by 62 pips, the Yen 104 pips, the antipodeans reversing any overnight gains in Europe and the kiwi on the back foot vs the Aussie to a ten-month high by 43 pips.
Day ahead
For the day ahead, we have a private speech from RBNZ's Wheeler and the deputy governor Spencer will speak on bank capital requirements - not a market mover. However, the GDT dairy auction could be a mover while futures suggest an 8% drop in global milk prices. The main event could come in Asia as the RBA, but markets expect policy to remain on hold. Meanwhile, for European trade, watch out for the Q4 GDP final.
Main topics from the U.S. session
- What's correlating n the FX space - Nomura
- The global economy’s recovery from the financial crisis may be at risk of failing - BIS
- US Factor Orders: Data from manufacturing sector continues to show improvement - Wells Fargo
- EUR/USD hits fresh lows under 1.0580
- USD/JPY: bulls with cheaper dollars eye through 114 handle
- IFOP Poll: Macron to defeat Le Pen in 2nd round
- RBA: unchanged but AUD to struggle due to Fed - Scotiabank
- Economic outlook for the United States of America - Nomura