To and Fro, here we go
Firming US yields overnight contributed to a stronger USD outperformance with the DXY breaching the 94 resistance level. While economic data drivers were few and far between dealer’s were left to chew on remarks by European Central Bank Mario Draghi, German Politics and of course the market’s fascination with yield curve developments
Mario Draghi didn’t mention anything particularly penetrating but continues to signal that the Eurozone is still dependant on a healthy measure of monetary stimulus given the lack of inflation. This was enough to convince traders that 1.1800 was not a happy place to be caught long and the EUR subsequently slid lower through most of the NY session
Uncertainty over the Jamacia accord continues to weigh on near-term sentiment but given the outcome could be more positive pro-European-Union, ultimately until something permanently snaps the noise is only mildly EUR negative. But frankly, there was nothing positive priced into the market for a Jamaica coalition, so this should not be a reliable driver for EUR sentiment although it will likely weigh on top side progress near term.
In fact, those of us that trade the single currency are desensitised to Monday morning EU political noise as given the adroit negotiating skills of European politicians, cooler heads always seem to prevail. With that in mind, dealers will continue to focus on ECB expectations and continental growth as the critical drivers in Eur sentiment.
The Japanese Yen
USDJPY rallied from the NY open, climbing from ¥112.09 to ¥112.70, snapping a one-week downtrend. While there was no specific news other than to guess that investors are expecting an early holiday present in the form of tax reform, A moderately better risk tone and rising US Treasury yields supported the dollar momentum
Overall Wall Street finished in the green and for all intensive purposes ignored Trump calling North Korea a “state sponsor of terrorism” and promising new sanctions while exhibiting little emotion to Janet Yellen resignation
The Australian Dollar
The Australian dollar continues to trade in no man’s land as the RBA monetary policy meeting minutes failed to ignite any significant action despite tacking to a more dovish course. Again, and without sounding like a broken record, I suspect the next big move for the Aud will be US dollar driven so I think we could be back on fed watch.