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Forex today: Dollar eases back, CAD/WTI slide and sterling rides Brexit deal optimism

  • Forex today was seeing further bleeding in the DXY that dropped from 96.70 to a low of 96.49 into the close. 
  • Eyes are set on the FOMC next week, although trade hopes lifted some spirits. 

Comments from Chinese Premier Li Keqiang enthused markets, Beijing’s No. 2 leader after President Xi Jinping, had been optimistic saying that a deal between the US and Chinese can be achieved that suits both parties helped to curb the recent pessimism. Meanwhile, however, U.S. Treasury Secretary Steven Mnuchin, speaking to reporters after his Senate testimony in front of a finance committee, saying “there’s still a lot of work to do.”

The euro was unable to capitalise on dollar outflows and fell to 1.1300 initially but managed to flip over to test the midpoint of the handle before settling mid range around 1.1320. Cable was sucking up the Brexit optimism with the probability of a DUP deal, and a subsequent deal agreed in Parliament. The pair travelled between 1.3202 and 1.3300, ending the session at 1.3285. The yen was moving between a range of 111.38 and 111.90, ending at 111.45 taking its cues from stocks on Wal Street that finished higher with a five-month high in the S&P and NASDAQ. The Loonie was pressured on soft housing as well as with WTI dropping back from key resistance down to critical support following reports that waivers on Iranian sanctions could come into effect. 

North American data:

Analysts at TD Securities offered a summary of the key data releases as follows:

  • “USD The NY Empire manufacturing index surprised to the downside March, printing a 3.7 down from 8.8 in February. The release showed declines in new orders and production, though both remained in expansionary territory. On balance that left the ISM-adjusted Empire unchanged at 52.6, which may point to a stable to slightly higher read on ISM in our view. However, we await subsequent regional surveys like the Philly Fed and Richmond to further assess our projection.
  • USD Industrial production bounced back modestly in February, registering a 0.1% m/m increase. This was largely in line with our projection but came in below market expectations at 0.4%. As we expected, manufacturing activities posted its second consecutive contraction (-0.4%) and was a major drag on IP growth. On a positive note, the weaker than expected performance in February production is on the heels of upward revisions to January.
  • USD UMich’s sentiment recovered further to 97.8 in March on the back of an increase in the expectations component, which was in line with the pickup in consumer confidence. Importantly, long term inflation expectations recovered back to 2.5% though they remain in the low end of ranges, while 1 year expectations slipped to 2.4% from 2.6%.
  • CAD Existing home sales fell by 9.1% in February (market: -4.0%) for the second largest monthly decline since 2010. Weaker sales activity was broad-based which will be disappointing to those at the BoC, especially after early signs of stabilization in January. Manufacturing sales for January were more upbeat with a 1.0% increase (market: +0.4%) on broad strength. Volumes rose by 1.4% m/m, which should help offset some of the weakness emanating from the energy sector in Q1.”

Key notes from US session:

Wall Street shrugs of Mnuchin’s “there’s still a lot of work to do” on trade talks, DJIA back en route to 78.6% fibo

Week ahead:

All eyes will be on the FOMC with a focus on the dots – no more than one more hike for this year is expected to be shown – There are none expected for 2020. Investors are looking for some deeper guidance on the balance sheet runoff. Powell’s press conference will likely address that as well.

Key calendar events: Monday: NAHB housing market index; Tuesday: Factory orders; Wednesday: FOMC decision; Thursday: Philly Fed Initial jobless claims; Friday: Markit manufacturing PMI, Wholesale inventories, Existing home sales.

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