Forex today: risk driven by a surge in WTI, dollar takes another hit

Forex today was dominated by WTI rallying some 3% overnight, taking risk higher in the US with it which means stocks were on target for fresh record highs on Wall Street again, albeit not quite making the ground in the benchmarks.

With higher oil and gold, the dollar subsequently underperformed across the majority of the G7's, with only the pound and yen really struggling despite geopolitical concerns from the N.Korean news from over the weekend. 

There was some doubt thrown into the outlook for the Fed at the end of last week on the back of disappoint data and today's wasn't much better, albeit lower tier. The NY Empire State manufacturing index showed that business activity in the region fell sharply according to the survey, down to -0.1 from previous 7.0. The US NAHB house market index was an improvement however at 70 in May from the prior 68. Nevertheless, the DXY was down for the majority of the day, currently -0.34% within a range of between 98.787-99.262 and below the mean well below the previous close of 99.25.

Yields in the 10-year were up for the majority of the day's range and trading between 2.3187-2.3503%. Gold performed well on the back of the dollar's weakness and a strong o/n bid in WTI. Gold traded in a range between 1,227.02-1,237.40 vs a prior close of 1,228.43, currently up at +0.20% at 1,230 spot towards the close. WTI is closing the day up just over 2% at 48.83bbls spot vs the range between 47.75-49.66bbls and previous close of 47.84bbls.

As for the pairs, the euro is closing +0.42% at 1.0977, having failed ten pips away from a break of the 1.10 handle's psychological resistance. Cable is closing in the green, but only just at +0.06%. GBP/USD was sliding back from late London highs at 1.2919 and down to 1.2872 the low in a drop through stops just above the 1.29 handle, supported around the hourly 200 smoothed sma at 1.2883. USD/CAD dropped as WTI fell back just under $1.00 in the US session. The CAD is higher by 0.52%. The Aussie, awaiting this week's jobs data, is up +0.38% and the Kiwi, awaiting this week's GDTprice index, is higher by 0.16%.

The day ahead

Analysts at Westpac offered the day's event risk:

"NZ: The second GDT dairy auction in May is currently priced by futures to result in a modest decline in whole milk powder prices.

Australia: The May RBA minutes are to mirror the SoMP with the labour market, housing and household indebtedness to remain key issues. Apr new vehicle sales had last come in at 1.9% in Mar but have been tracking on a moderate downtrend in 2017.

Euro Area: Q1 GDP 2nd estimate is expected to confirm a strong flash estimate of 0.5%.

US: Apr industrial production previously rose 0.5% in Mar driven by the volatile utilities sector. Manufacturing was soft, particularly in autos, with real data clearly disconnected from surging survey indices. Apr housing starts and building permits have continued the positive trend in 2017, Mar showed 9.2%yr and 17.0%yr annual increases respectively. Single family completions jumped, helping to ease currently strained inventory levels.

UK: Apr CPI, last at 0.4% in Mar, is expected to continue rising due to earlier sterling depreciation."

Key notes from the US session

• US stocks jump at open, buoyed by surging oil prices
• WTI drops below $49, still up more than 2% on day
• Gold intermarket: close ties with WTI stuck around 10 hourly sma, capped here?
• US Dollar consolidates losses around 98.80