Forex today: Dollar keeps sinking below 97 handle
- US Dollar sulks below the 97 handle to fresh lows following Federal Reserve easing bias.
- Markets are expecting a total of four cuts priced by mid-2020.
Forex today was seeing the dollar bleeding out following a switch to a new easing cycle bias from the Federal Reserve. The DXY extended losses below the 97 handle and met a low of 96.57, settling just above the 200-hour simple moving average. However, US 10 year treasury yields were below the 2.00% mark, probing 1.97% which was a three-year low. Later in the U.S. session, the yield managed to find some air up at 2.02%. Meanwhile, the two-year yields were down at 1.70% which was a two-year low before finding ground higher to 1.78%. Following yesterday FOMC, markets are expecting a total of four cuts priced by mid-2020 with the first cut as soon as next month.
As for US data, the Philadelphia Fed’s manufacturing survey provided more evidence of lost momentum in the US manufacturing sector, falling 16.3 points to 0.3 in June (from 16.6 in May, as noted nay analysts at ANZ Bank:
"The majority of the weakness was concentrated in the prices sub-components. Prices received fell almost 17 points to 0.6 whilst prices paid dropped to 12.9 (from 23.1 in May). New orders were also down, to 8.3 from 11.0 last month, while the employment component was off slightly, at 15.2 from 18.2 in May. The May leading indicator also weakened, coming in unchanged on the month and indicating a loss in forward momentum. In contrast, initial claims data showed the labour market remained solid, with claims falling to 216k (from 222k at the last read)."
Analysts at Westpac summarised the key major Asian currency market action as follows:
- EUR/USD rose 0.6% over the day, to 1.1295, while GBP/USD added 0.5% to 1.2700, slipping back slightly on the Bank of England meeting.
- USD/JPY extended its decline from 108.10 in the Sydney morning to 107.30, despite the slight recovery in US yields in late NY trade.
- AUD/USD extended a two-day old rally as far as 0.6936, steadying at 0.6925, up 0.6% overall.
- NZD similarly rose from 0.6560 to 0.6590.
- AUD/NZD ranged between 1.0480 and 1.0525, still a little softer than pre-NZ GDP data, which was slightly firmer than expected.
Key notes from Wall Street:
Wall Street rallies in the aftermath of the Fed, DJIA just shy of Oct 2018 highs
Key events ahead:
Japan May CPI is expected to show annual headline inflation declining to 0.7%yr from 0.9%yr. The Bank of Japan held steady yesterday as expected but faces a challenge as the 10 year JGB yield falls to -0.17%.