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Dollar edges up ahead of US CPI, Powell mum on rates

Dollar edges up ahead of US CPI, Powell mum on rates

Bond yields rebound, stocks finish with modest gains

Summary

The Dollar closed with modest gains after Fed Chair Jerome Powell refrained from commenting on interest rates. Powell instead focussed his speech on the Fed’s independence.

Markets awaited the US CPI report, released early Friday (12.30 am) Sydney. The inflation number for December is expected to moderate on an annual basis to 6.5% from 7.1%.

US bond yields rebounded following their drop at the start of the week. The benchmark 10-year note finished with at 3.61% from 3.53% early yesterday. Two-year yields climbed 3 basis points to 4.24%.

A popular gauge of the Greenback’s value against a basket of 6 major currencies, the Dollar Index (DXY) rallied 0.24% to 102.93 (102.80). The Euro (EUR/USD) closed little changed at 1.0741 (1.0733).

The US Dollar grinded higher against the Japanese Yen (USD/JPY) to finish at 132.20 from its 131.85 open yesterday. Sterling (GBP/USD) dipped to 1.2158 (1.2184).

The Australian Dollar (AUD/USD) slid to 0.6893 (0.6912) while the Kiwi (NZD/USD) closed flat at 0.6367. Against the Canadian Loonie, the Greenback edged up to 1.3423 from 1.3390.

Against the Asian and EMFX the Dollar was mixed. The USD/THB pair was last at 33.45 from 33.47 yesterday. Against the Offshore Chinese Yuan (USD/CNH), the Greenback closed at 6.7865 (6.7800).

Wall Street stocks advanced modestly. The DOW rallied 0.37% finishing at 33,647 from 33,527. The S&P 500 rose 0.48% to 3,910 (3,890 yesterday). Other global share markets rose.

Economic data released yesterday saw Japan’s December Tokyo Annual CPI ease to 4% against forecasts of 4.5%, but higher than November’s 3.8%. The UK’s BRC December Retail Sales climbed to 6.5% from a previous 4.1%.

French Industrial Output (November) rose to 2%, beating forecasts at 0.8%. The US NFIB Business Optimism Index eased to 89.8 in December from November’s 91.9.

  • EUR/USD – The Euro gained modestly against the Greenback, finishing at 1.0741 (1.0733). It was the third day in a row that shared currency climbed against the Greenback. Overnight high traded was at 1.0760, matching yesterday’s peak. The low recorded was at 1.0712.

  • GBP/USD – Against the trend, the British Pound edged lower against the US Dollar, settling at 1.2158 from 1.2184 yesterday. Following yesterday’s strong rise against the Greenback, Sterling lost steam to finish lower. Overnight high traded was at 1.2198.

  • AUD/USD – The Aussie Battler slid against the broadly based stronger Greenback to 0.6893 at the New York close from yesterday’s 0.6912. The Australian Dollar traded to an overnight high at 0.6928 before easing at the close.

  • USD/JPY – The rebound in US bond yields lifted the Greenback 0.35% higher against the Japanese Yen to 132.20 from 131.85 yesterday. In another volatile session, the overnight high traded was at 132.48 while the low recorded was at 131.38.

On the lookout

The economic calendar for data releases today is light. New Zealand kicks off with its ANZ Bank December Commodity Prices (f/c -5.7% from -3.9% – FX Street).

Australia follows with its November Retail Sales report (m/m f/c 0.6% from -0.2%), and Australia’s Annual CPI for November (y/y f/c 7.3% from 6.9% – ACY Finlogix).

Japan follows with its Preliminary November Leading Economic Index (f/c 98 from 98.6 – ACY Finlogix), and Japanese Coincident Index for November (f/c 99.2 from 99.6 – ACY Finlogix).

China releases its December CPI (m/m no f/c, previous was -0.2%; y/y no f/c, previous was 1.6% FX Street), China’s December PPI (y/y no f/c, previous was -1.3% – FX Street).

Italy kicks off European data with its November Retail Sales (m/m f/c -0.9% from -0.4%; y/y f/c 0.5% from 1.3% – ACY Finlogix). The US has its 10-year Bond Auction, but there are no major economic data releases.

Trading perspective

As traders await Thursday’s (early Friday in Sydney) US CPI report, expect the Greenback to stay firm against its Rivals with traders looking to key central bank heads’ speeches later this week.

The rebound in US bond yields will underpin the Greenback. This morning’s focus will be on Australia’s CPI and Retail Sales data.

The Australian Dollar fell against the broadly based stronger Greenback. Consensus is for rise in annual CPI in November, to 7.3% from a previous 6.9%.

Australia’s Retail Sales are also expected to rise to 0.6% from -0.2% the previous month. Traders would need to see a both data releases higher than market expectations for the Australian Dollar to make headway against the Greenback.

  • AUD/USDThe Australian Dollar (AUD/USD) eased modestly against the Greenback, settling at 0.6895 from yesterday’s open at 0.6912. Overnight, the Australian Dollar traded to a low at 0.6860 before rally at the close. On the day, look for immediate support at 0.6860 to hold any aggressive selling. The next support level lies at 0.6830. Immediate resistance is found at 0.6920 followed by 0.6950. Look for the Aussie to trade a likely range of 0.6870-0.6920. Prefer to sell rallies.

  • EUR/USDThe Euro edged higher against the Greenback, finishing at 1.0741 from 1.0733 yesterday. Overnight high traded was at 1.0760 which is today’s immediate resistance. The next resistance level is found at 1.0790. On the downside, look for support at 1.0710 followed by 1.0680 and 1.0650. Looking for a range today, likely between 1.0700-50. Selling EUR/USD rallies is the preference.

(Source: Finlogix.com)

  • GBP/USDSterling slid against the broadly based stronger Greenback to 1.2158 from 1.2184 yesterday. The British Pound traded to an overnight low at 1.2110 before rallying at the close. The overnight high recorded was at 1.2198. Look for more choppy trade in the British currency with the likely range today of 1.2120-1.2220. Trade the range.

  • USD/JPYThe Greenback rallied against the Japanese Yen to 132.20 supported by firmer US bond yields. The benchmark US 10-year treasury rate rebounded 8 basis points to finish at 3.61% against 3.53% yesterday. Overnight high traded for the USD/JPY pair was at 132.48. Immediate resistance today is found at 132.50 followed by 132.80. On the downside, look for immediate support at 132.20 which is followed by 131.90. Look for the USD/JPY pair to remain firm in a likely range today of 131.50-132.50. Prefer to buy USD dips.

Have a good Wednesday ahead all, happy trading.

Written by Judith Nistro