Forex today: corporate earnings in focus, dollar a proxy trade on data

Forex today was once again governed by corporate earnings season and positive reports making for higher stocks and risk on while German and UK were traded off for a stronger dollar.

However, there was little in the way of action in the bond market, yields were edging lower on both the long-term and 10-years while the short term was once again extending their multi-year bull trend. The US 10yr treasury yield flopped down to 2.81%, while  the2yr yields were reaching up to 2.40% - and once again, to the highest level since 2008. Bloomberg had the Fed futures pointing towards a rate hike in June now at a 90% chance. the DXY was painting a more positive picture on the daily sticks, trading between 89.229 - 89.666 and closing the day n the higher end of that range. 

We also had some Fed speak on Tuesday. Centrist Williams expects a tighter rate path from the Fed with gradual hikes, (taken as dovish)  Harker was once again hawkish arguing that the labour market was tight while in stark contrast, Evans was saying that the US economy was, “firing on all cylinders” but was not advocating for a faster path of rate hikes, taken as slightly dovish.

As for other currencies, the single unit was performing on the bid to 1.2415 in London but the dismal ZEW data weighed on the euro for an NY open of 1.2375. The dollar was bid up when rising yields kicked in and sent the euro down to 1.2336 towards the 55-Day SMA and daily cloud top. The greenback was capped and traded lower late in NY enabling the euro to recover to and close around  1.2380 resistance. 

The pound has been tracking economic outcomes in the UK economy with the Feb unemployment dropping to a 43 year low of 4.2% while the employment number rose 55k. Average weekly earnings ex-bonus rose 2.8% y/y as expected although markets were concerned about the headline wage rise of 2.8%y/y being below the market forecast of 3.0%. On profit taking as well, the pound dropped from the post Brexit highs and down to a low of 1.4283 in NY. 

As for the cross, the markets note that reduced Brexit fears coupled with the prospects of higher UK rates should keep the pound underpinned and hence 
EUR/GBP continued its decline and dropped to 11-month low of 0.8621 in the NY session, ending the shift at 0.8650, (supported by dovish Williams and Evans).

The price action around USD/JPY was subdued and the price drifted sideways between 106.90 and 107.20, (stuck between the Tenkan and Cloud base at 106.89/107.20). Eyes are on Trump and Abe in talks with N.Korea as a critical topic of discussion. 

The Antipodeans were mostly defensive on downtick in the CRB while the Aussie was pressured by metal prices falling in European trade and the Aussie was unable to fully recover, despite a bull reversal in copper during NY. The Aussie was tucked in below the 100-D SMA at 0.7793 and fell back from the descending channel's resistance. The kiwi underperformed as well, closing the day -0.3%, but was underpinned by the milk auction results, (GDT PI +2.7% & WMP +0.9%).

Key notes from US session:

Wall Street bulls push stocks higher amid blockbuster corporate earnings