Intraday Market Thoughts

Dollar Snapped Up

by Adam Button
Mar 7, 2017 14:01

The sell-the-fact dollar dip bottomed out on Monday and then the US dollar made a slow climb as factory orders beat estimates. As Ashraf anticipated on Friday evening immediately after Yellen's comments, USD was sold after the fact and bought again at the start of the week. The performance chart below shows that as of 14:15 London/GMT, all currencies and metals are down vs USD with the exception of AUD, which was boosted by a neutral-positive RBA statement. GBP is the worst performing currency as more Brexit debate gets underway at the House of Lords. The Gold Premium trade has finally been filled, joining silver and four other trades. 

The US dollar is showing signs of a renewed strength but in less likely places. The dollar recovered all of the Friday dip against the commodity currencies and the pound on Monday. The gains highlight what could be another round of Fed-driven trading.

Expect rising Fed expectations to keep a dips shallow in the lead-up to the March 15 FOMC so long as the jobs report doesn't disappoint badly. The fresh concerns about China could also hurt commodities. The market is trying to understand exactly why certain long-held references to maintain a generally stable yuan meant. It may mean that the 2% daily band is removed and the currency is allowed to be more unstable.

That's inevitable in the long-run but in the short run it could trigger swift capital moves that destabilize trading and raise uncertainty.

Earleir today, the US trade deficit widened to $48.5 bn, the largest since March 2012. Economic news was light to start the week but was highlighted by the February factory orders data. It rose 1.2% compared to 1.0% and the prior was revised higher. The key durable goods numbers were also bumped upwards.The data helped to put a modest bid into the US dollar and it finished near the best levels of the day.

Act Exp Prev GMT
Factory Orders (m/m)
1.2% 1.1% 1.3% Mar 06 15:00

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