Intraday Market Thoughts

USD Gains from Indices Selloff

by Adam Button
Feb 20, 2018 23:10

The USD-indices inverse relation was bolstered today as the US returned from a holiday Tuesday and the climb in USD continued for a third day. The dollar was the top performer while CHF and CAD lagged. A full slate of data from Australia, Japan and the UK is due up next. A 3rd USD trade was issued in the Premium Insights. Indices extend losses after Friday's doji action.

The dollar showed some better signs Tuesday as it climbed in a more-liquid market. EUR/USD appears to have stalled after two attempts at 1.25 and is consolidating in the 1.22-1.25 range in part due to softer (but still healthy) ZEW and eurozone consumer confidence readings.

Treasury yields continued to march higher with the entire curve hitting fresh multi-year highs. The enthusiasm was dampened slightly after a 2-year auction but sales of 5 and 7-year notes in the next two days could flip the script.

One particularly soft currency this month is CAD, which now at the bottom of the YTD performance chart. December Canadian wholesale sales fell 0.5% compared to a +0.4% reading expected but retail sales and CPI numbers later this week will be the numbers to watch.

In the immediate term, the focus will first shift to AUD, which hit a six-day low Tuesday. Job vacancies, construction work and wages data is all due early in Asia-Pacific trading. The Q4 wage index is forecast to rise 2.0% and it will likely be the market driver barring another big surprise in construction data. There are currently 2 AUD trades in the Premium Insights, both at break-even.

The focus then moves to Japan with the Nikkei PMI at 0030 GMT and the all-industry activity index at 0430 GMT. Both are unlikely to be market movers and China remains on holiday.

The big headlines in the day ahead will be from the UK jobs/wages report due at 0930 GMT. The path of UK economy at the moment remains opaque so all the numbers will be watched closely for any sign of Brexit strain or resilience. Wages numbers will be especially important with avg weekly earnings forecast to rise 2.5% y/y. The January FOMC minutes follow in Wednesday evening.

Act Exp Prev GMT
Wholesale Sales (m/m)
-0.5% 0.4% 0.3% Feb 20 13:30
Flash Manufacturing PMI
55.4 55.5 Feb 21 14:45
Eurozone Flash PMI Manufacturing
59.2 59.6 Feb 21 9:00
All Industries Activity (m/m)
0.5% 1.0% Feb 21 4:30
Average Earnings Index (3m/y)
2.5% 2.5% Feb 21 9:30
Eurozone Consumer Confidence
0 1 1 Feb 20 15:00
FOMC Meeting Minutes
Feb 21 19:00

Latest IMTs