Dollar Extends Slide, Oil Strike Ends

A second day of US dollar selling and commodity strength will face a test after the oil strike in Kuwait came to an end. The kiwi was the top performer Tuesday while the yen lagged as US stocks touched the highest since November. Japanese trade data is due later. AUDJPY and CADJPY were both  stopped out in the Premium Insights. A new trade is due tonight before the Asia Wednesday session.

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The US dollar was under broad pressure on Tuesday and commodity currencies rallied to cycle highs. Late-breaking news that the Kuwait oil strike has ended and a larger API supply build will challenge that trend in the day ahead.

So far, the resilience of commodities has been impressive. The demand side has solidified since February after central banks took a dovish shift. That same dynamic has underpinned stock markets.

The question is whether it's sustainable. The oil market is no double oversupplied as continued inventory reports underscore. In addition, the signals from Saudi Arabia regarding non-cooperation are clear. Iran also said Tuesday that an increase in exports was only being held back by a temporary lack of ships.

Economic news on the day was focused outside the US. The BOC's Poloz warned that strong Q1 data was likely skewed by inventories, autos and temporary factors. He said there remains plenty of excess capacity in the economy but highlighted that there are no plans to ease further.

The RBA's Stevens refrained from jawboning and said the full effects of easing hadn't hit yet. He also lauded the Chinese economy and the latest steps by the PBOC to stimulate. The Australian dollar hit a 9-month high later largely due to commodities but perhaps due to Stevens as well. However, his lack of jawboning was because he was in New York, not because he's changed his mind about the value of the Aussie.

The first signs Japan may back off plans to raise the consumption tax by 2 points next year also emerged. The policy head of the LDP said they're considering the option of an incremental 1 point hike.

Before long they'll be considering monetizing Japan's debt but in the short term March trade data is in focus at 2350 GMT. A surplus of 843B yen is expected, up from 242B in Feb. We're curious to see how exports have performed after the yen rally. The consensus is for a 7% decline y/y.

The other event to watch is the New York Primary. Trump and Hillary will win by large margins but we'll be tuning in to see if Trump threatens trouble if the Republican nomination is 'stolen' from him.