The FX space in the US session was dominated by a positive tone around the US economy. The dollar gained traction on a number of events that included a surge in consumer confidence and hawkish Fed speakers.
The Consumer Board Consumer Confidence Index surged higher to 125.6 and beating expectations of an 114 print. The Richmond Fed manufacturing survey was also a positive. The survey rose from 17 to 22 vs the 15 expected. This date is supportive of an improved set of Chicago PMI, and ISM surveys. (11.3%) and Portland. In respect to Fed speakers, Chicago’s Fed President Charles Evans and Dallas’ Federal Reserve Bank President Robert Kaplan both advocated for further rate hikes this year. Yellen was a non-event but she did display a cautionary tone around the jobs sector noting persistently high unemployment.
DXY up by 0.6% and rise in US yields support USD/JPY on 111 handle
The US dollar rallied on the feel good vibes and was up 0.6% on the day after making multi-month lows after the healthcare bill fallout between the GOP. Stocks rallied as well and yields are back into positive territory for the dollar. The US 10yr treasury yields rallied from the lows of 2.36% to 2.42%, and 2yr yields rose from 1.25% to 1.30%. Markets continue to price in around 60% chances of a June Fed hike. The Yen triggered stops onto the 111 handle in a rally from the 110.17 lows making highs of 111.20. Sterling was under pressure domestically with Article 50 being triggered tomorrow and due to the Scottish Parliament’s backing of a second referendum. GBP/USD dropped from 1.2597 to 1.2439 meeting and breaking below the hourly 200 EMA at 1.2457. The kiwi ranged between 50 pips on the 0.70 handle while the Aussie garnered support from strength in base metals and a recovery iron ore particularly. The better risk tone enabled the Aussie to climb from 0.7587 to 0.7655 highs.
The day ahead
Analysts at Westpac offered the event risks for the day ahead:
“US: The Fedspeak schedule is again busy. Powell speaks on the history and structure of the Fed, Evans on the economy at a capital markets conference in Frankfurt, Rosengren on the economic outlook, and Williams gives a speech titled “From Sustained Recovery to Sustainable Growth: What a Difference Four Years Makes” in New York. Feb pending home sales is out after falling 2.8% last month, which left the Index flat (+0.4%) on a yearly basis. Demand has been robust, but an insufficient amount of listings has led to a drop in contract signings.
UK: PM May is set to trigger Article 50, formally beginning the two-year exit negotiations process.”
Key events in US session: