Headline and Yo-Yo Syndrome takes grip

Headline and Yo-Yo Syndrome takes grip

With the major US CPI data on tap, markets trod cautiously but were getting tugged in every direction due to the fallout from the FBI Director Comey saga, North Korea, and the markets take on US PPI data. Overall, the markets had a risk-off tinge to them.

The risk-off mood took a grip in early New York trade after geopolitical angst lurched back into the headlines when the annual “US threats” report from the US Director of National Intelligence said North Korea is poised to test the first inter-continental ballistic missile (ICBM) flight this year.Again,  It highlights the markets acuteness to ominous North Korea geopolitical headlines.

The political noise continues to escalate over Trump’s firing of FBI Directory Comey as White House critics continue to probe for a smoking gun, where the President is deliberately trying to thwart the FBI’s probe of “Russigate”. This storyline has clearly rattled equity investors, given this political cloud could cripple the fragile support for Trump’s tax policy.

Following a soft March reading, the significant beat on the PPI caught the market’s attention as US yields rose sharply, and the dollar firmed. While the strength in both headline and core could suggest a possible beat on tonight’s US CPI print, keep in mind, this is second tier stuff. Despite the upside surprise, it’s wise not to read too much into the PPI print as the surprise correlations are not high and as suggested by the current market lean and the lack of CPI revisions, the street is not putting too much credence yesterday’s print.  

Australian Dollar

Commodity currencies are trading better against USD this morning as oil and copper continue to trade higher. The view that commodity prices are basing gathers momentum.

The USD is weighed down by the Trump/Comey sideshow which has seen the greenback move lower against most of the G-10.

Ahead of tonight’s key US data dump (CPI and Retails), the Aussie dollar is in range trade mentality with positions looking neutral as dealers await the next catalyst. But the Aussie seems unable to stage any meaningful rally despite better buyers over the last 24 hours. We should expect the currency to trade with heavy bias until the bounce on commodity prices is confirmed, and lingering concerns over China’s de-leverage abate.

It’s still too early to confirm that the low is in for commodities, but with a good portion of the recent unwind likely attributed to China tightening their financial regulations, bargain hunters will probably return sooner than later; supporting the view that the worst of the commodity rout may be behind us.

Japanese Yen

Last night’s US economic data had traders thinking a repricing of the Fed curve is in order, playing off Fed President Eric Rosengren’s surprising call for three more rate hikes in 2017 causing the dollar to firm. However, geopolitical concerns swung uncomfortably back to the forefront for the dollar bulls while at the same time the Trump/Comey sideshow noise was ramping up. In whipsaw fashion, USDJPY plummeted 113.45 on a combination of stop loss and profit taking before bouncing back above 114 only to drift lower into the Asia session.

With CPI on tap and both geo and US political risk ratcheting higher, I suspect dealers will take a nimble approach and keep positioning relatively tight. Furthermore, given Rosengren’s hawkish banter this week, there will be heightened focus on Fed Evans later today (traditional Dove) so position with care.

Overall, I expect the USDJPY to shrug off the headline risk and failing any major downside CPI surprise , USDJPY should continue to trade constructively.


With gallons of ink spilt and perma-bears in full swing, vexing the Vix remains top of the investment news topic list. While the comparison is made to the GFC 2007-08, given the current upswing in global growth and extremely dovish global central banker (look no further than yesterday’s RBNZ  dovish statement ), shouldn’t this low volatility be expected?

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes