Forex today: dollar gets a lift in thin holiday trade

Analysis General

Published: 2/19/2018 5:05:00 PM

Forex today was a holiday in the US session, following China's celebrations of the Lunar New Year, (mainland China closed until Thursday). Many traders in Canada would have been absent also while observing Canada's Family Day.

However, while markets were closed, it did not stop the DXY from moving within a range of between 88.955 - 89.442, closing  +0.13% on the day at 89.21. Also, while the US Treasury market was closed, the futures were still trading. The implied 10yr yield was rising slightly from 2.88% to 2.90% and, in a Bloomberg calculation,  Fed fund futures yields are pricing another rate hike on 21 March with a total of four hikes by end-2019, (somewhat less hawkish than where the markets had recently been basing - four hikes by the end of 2018). Stil, the dollar has been in recovery from 88.59 recent lows, being a critical support area.

From a fundamental perspective, there was little to go on since some second-tier European data overnight. In the early part of the US session, and After Ireland's central bank chief Philip Lane pulled out of the race, we had the ascension of Spain's Economic Minister Luis De Guindos who has been selected in as the next ECB VP nominee and to take over from Portugal's Vitor Constancio, leaving in May this year after 8 years of service. Also, Latvia's central bank gov. Ilmars Rimsevics, how had been detained and questioned on corruption charges was released after denying the charges. 

BoE's Carney made a speech at 18.45 GMT today at Regents Univerity under the title, "Leadership and Values". However, there was nothing related to monetary policy nor any market reaction. He spoke a little about Bitcoin saying that it has failed as a store of value and that was about it in terms of comments related in any way to the markets. 

In terms of other currencies, EUR/USD ended the day flat at 1.2410 after an initial test of 1.2369. GBP/USD followed suit in the sike in the greenback, dropping to 1.3959. However, bulls were committed below the 1.40 handle and the price corrected back to the figure, albeit some margin from the highs of the day at 1.4050. For the cross ears were left to the ground for any political sound bites from various meetings happing across Europe that moved over into the US session with aforementioned movements around the ECB and in terms of Brexit, things were quiet today EUR/GBP was flat trading around 0.8858 having posted a daily high at 0.8871 and low at 0.8840. 

USD/JPY was pushing a little higher and away from the recent lows below the 106 handle that were scored last week down at 105.54 - the lowest levels since November 2016 and opening eyes towards a break below 105 and to pre-Trump election territory on the 101 handle.  As for the antipodeans, AUD/USD was sideways within a range of 0.7900 and 0.7930 while the Kiwi NZD/USD slipped from 0.7400 to 0.7354. 

Key events from US shift:

Funda, political and European market recap: a quiet start with some political sound bites

Key events ahead:

Analysts at Westpac offerd the key event risks ahead:

"The minutes from the RBA’s 6 Feb meeting are released at 11:30am Syd/Mel. There should be little or no market reaction given that since the meeting, we have seen the lengthy quarterly statement, heard speeches and even semi-annual testimony by Governor Lowe.

Hong Kong markets reopen today but mainland China and Taiwan are still closed for lunar new year.

The GDT dairy auction in London trade tonight is priced by futures to result in a 1%-2% rise in whole milk powder prices.

Germany’s federal election may have been in October 2017 but the government remains in caretaker mode until a coalition is formalized. The leaders of the centre-right Christian Democrats and centre-left Social Democrats have agreed to resume their “grand” coalition but the SDP members need to provide their approval. They start voting today.

The February ZEW survey of German investor sentiment is expected to remain very bullish, though maybe just short of January’s record high. US markets reopen from their long weekend but there is nothing of note on the schedule."

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