Hot US CPI Boosts Greenback, JPY Slides, BOJ Rate Hike Bets Ease

US 10-Yr Yield Soars, GBP Slides, UK Jobless Rate Up; Asia-EMFX Fall 

Summary:

The US Headline Inflation report in February climbed to an annual rate of 3.2%, beating expectations of 3.1% boosting the Dollar. Core US CPI (excluding food and energy) rose to 0.4%, matching January’s rise. 

The Dollar Index (DXY), which measures the Greenback’s value against a basket of six major currencies, edged higher to 102.53 from 102.38 previously. The DXY soared to a high at 102.82. 

US Treasury bond yields soared with the 10-year settling at 4.15% from 4.07% previously. The two-year US bond yield jumped 12 basis points to 4.59%. Other global bond rates were mixed.

Against the yield sensitive Japanese Yen, the US Dollar rebounded to 147.65 (147.00). Bank of Japan Governor Kazuo Ueda remained cautious on the economy and failed to provide forward guidance regarding ending negative rates. 

Sterling (GBP/USD) slid to 1.2792 from 1.2855. Britain’s Employment report saw the Jobless rate climb to 3.9% from 3.8% previously. The UK Average Earnings Index dipped to 5.6% from 5.8%. 

The Euro (EUR/USD) dipped to 1.0923 from 1.0935 previously. Broad-based US Dollar strength due to the higher US inflation report weighed on the shared currency. 

The Australian Dollar (AUD/USD) dipped to 0.6604 against 0.6624 previously. Australia’s National Australia Bank’s Business Confidence Index fell to 0 against 1 previously. New Zealand’s Kiwi (NZD/USD) edged lower to 0.6153 (0.6180). 

Against the Asian and Emerging Market Currencies, the US Dollar closed with modest gains. The USD/SGD pair (US Dollar-Singapore Dollar) edged higher to 1.3325 from 1.3310. Against the Thai Baht (USD/THB), the Greenback climbed 0.35% to 35.75 (35.40). 

Wall Street Stocks rallied. The DOW climbed to 39,020 (38,730) while the S&P 500 gained 1.03% to 5,177 from 5,127 previously. Other global shares finished higher. 

Other economic data released yesterday saw Japan’s Annual Preliminary Machine Tool Orders climb to -8 from -14 previously. Japan’s GDP (q/q) rose to 0.1% from -0.1% previously but missed forecasts at 0.3%. 

• USD/JPY – the roller coaster ride for this currency pair continued with another choppy day of trading. The Dollar finished at 147.65 Yen, up from 147.00 previously. The overnight high traded was at 148.20 while the overnight low recorded was at 146.62.
• AUD/USD – the Aussie Battler dipped against the broadly based stronger US Dollar to 0.6604 in late New York, down from 0.6624. Overnight, the Australian Dollar climbed to a high at 0.6639 before easing to its close. The overnight low recorded was 0.6584.
• EUR/USD – The shared currency reversed its gains, dipping to 1.0923 from 1.0935. The Euro traded to an overnight low at 1.0901 before steadying. The overnight high recorded was 1.0944. There were no major data releases out of the Eurozone yesterday.
• GBP/USD – Sterling was pounded lower against the overall stronger US Dollar in choppy trade to finish at 1.2792 from 1.2855 previously. Overnight, the British Pound traded to a low at 1.2732 before stabilizing. Sterling saw an overnight high at 1.2823.

On the Lookout: 

Today’s economic data calendar picks up, starting with New Zealand’s February Annual Food Price Inflation report (f/c 3.4% from 4% previously). The expectations between estimates of the current report vary widely. We could see some fireworks in the currency depending on the outcome. There are no other major Asian data releases. 

The UK kicks off Europe with a plethora of data starting with the January GDP report (m/m f/c 0% from 0.8%; y/y f/c -0.3% from 0% - ACY Finlogix). The UK also releases its January Industrial Production (m/m f/c 0% from 0.6%; y/y f/c 0.7% from 0.6% - ACY Finlogix), UK January Manufacturing Production (m/m f/c 0% from 0.8%; y/y f/c 0.7% from 0.6% - ACY Finlogix), UK January Goods Trade Balance (f/c -GBP 15 billion from -GBP 13.989 billion – ACY Finlogix). 

The Eurozone follows with its January Industrial Production (m/m f/c -1.5% from 2.6%; y/y f/c -2.9% from 1.2% - ACY Finlofix). There are no major US economic data releases scheduled for today. 

Trading Perspective:

The Dollar reversed its slide from Monday, boosted by a higher-than-expected US inflation report in February. Which resulted in a rebound in US Treasury yields, the ten-year settling at 4.15%. In contrast, other bond rates either fell or if they rose, the climb was to a lesser extent than US yields. 

This should give the US currency support at current levels with the likelihood of further gains against various currencies. There are no major US data releases today but tomorrow see the US Retail Sales and Producer Price Index reports. This should also keep markets from pushing yields and FX to extremes. Trading ranges will be the order of the day, albeit with wider scope.

• USD/JPY – expect another roller coaster ride in this currency pair. The Greenback finished at 147.65 Japanese Yen from 147.00 previously. Today, immediate resistance can be found at 147.95 followed by 148.15 and 148.45. Immediate support can be found at 147.35, 147.05 and 146.85. Look for another roller coaster ride in the USD/JPY pair, likely between 146.80-147.30. Trade the range, preference is to buy USD/JPY dips.

• AUD/USD – the Aussie Battler dipped against the overall stronger Greenback, finishing at 0.6604 (0.6624). On the day, look for immediate support in the Aussie at 0.6585 (overnight low traded was 0.6584). The next support level lies at 0.6555 and 0.6525. Immediate resistance can be found at 0.6640 (overnight high traded was 0.6639). The next resistance level lies at 0.6670. Look for more choppy trade, likely between 0.6570-0.6670. Prefer to sell Aussie on strength today.
• EUR/USD – the Euro settled at 1.0923, modestly lower from 1.0935 previously. Broad-based US Dollar strength following a hotter-than-expected US CPI report weighed on the shared currency. On the day, look for immediate support at 1.0900 (overnight low traded was 1.0901). The next support level lies at 1.0870 and 1.0840. On the topside, immediate resistance can be found at 1.0950 (overnight high traded was 1.0944). The next resistance level lies at 1.0980. Look for the Euro to trade in a likely range today of 1.0850-1.0950. Preference is to sell Euro rallies.
• GBP/USD – Sterling slid against the overall stronger US Dollar to 1.2792 from 1.2855. On the day look for immediate support at 1.2760 followed by 1.2730 (overnight low traded was 1.2732). The next support level can be found at 1.2700. On the topside, look for immediate resistance at 1.2820 (overnight high traded was 1.2823). The next resistance level lies at 1.2850. Look for consolidation in Sterling today, likely between 1.2720-1.2820. Trade the range, with the preference to sell Sterling on strength.

Have a good Wednesday ahead. Happy trading all. 

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