Forex today: better risk tone, stocks, dollar and rates all up on the session, higher beta not sustained
Forex today was a good performance for the bulls. Stocks were up with a positive vibe on Wall Street while US rates and the US dollar were also higher subsequently.
Asia led the way with a lift from a bullish performance in Shanghai while Trump's positive sentiment and communication in the US shift around tax reform legislation boosted risk sentiment on trading desks and investor's appetite.
The US dollar continues to trade robustly on the 93 handle and within a range of 93.061 - 93.577, +0.45% at the close at 93.51. "US 10yr treasury yields rose from 2.19% to 2.22%, 2yr yields from 1.31% to 1.32%. Meanwhile, Fed fund futures yields repriced the chance of a December rate hike at around 36% (from 40%)," explained analysts at Westpac.
The euro entered the market in the US on the back foot due to terrible ZEW numbers and close to break-out boundaries to the downside on rates as well. Traders are specifically concerned heading into the Jackson Hole this week and the currency will be vulnerable without Draghi's endorsement of QE tapering. The pound was unable to maintain the bid and suffered supply at 1.2840/50 to lows of 1.2810, leaving the cross better bid and up to 10.5-month highs eyeing a test of the 0.92 handle.
USD/JPY was elevated after a bounce on Wall Street testing the commitments of the bears and long yen positions across the board after a number of sessions of poor risk sentiment. Meanwhile, the better risk tone was still unable to lend much in the way of any sustainable support to the higher beta currencies, despite the notion that bullish metals in copper and iron ore should both be supportive to the Aussie that closed under water by -0.35%. The stretched Kiwi also dropped back by -0.67%. The Canadian dollar closed flat despite WTI up by +0.72%.
Key events ahead
"NZ: The Government’s Pre-Election Fiscal Update (PREFU) is expected to unveil an increased operating surplus thanks to a higher tax take. Markets will be interested in any changes to the bond issuance program," - Westpac
Key notes from the US shift
- Wall Street extends gains as risk appetite improves
- Dollar Index erases Monday’s losses and tests 93.50
- U.S. house prices rise 1.6% in second quarter
- Philly Fed: Firm-level general activity index rose to its highest reading in 4 months