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Forexlive Americas FX news wrap: US dollar claws some back | Forexlive

Markets:

  • Gold down $12 to $1760
  • WTI crude oil down $3.72 to $81.87
  • US 10-year yields up 8.3 bps to 3.78%
  • S&P 500 down 20 points to 3948
  • CAD leads, CHF lags

It was a tough day to stitch together a clear narrative. The US dollar was strong ahead of North American trade and Bullard’s early comments helped the case. He wasn’t specifically talking about an upcoming meeting or pushing hard but he laid out a case where rates could rise as high as 7%.

Economic data was mixed but the anticipated rise in initial jobless claims still hasn’t materialized and the home building sector isn’t crashing. Yields rose and that sent the dollar to a peak at the London fix. Afterwards it steadily drifted lower as the tone in equities improved.

Helping out the broader market and putting downward pressure on inflation was a drop in oil prices as China covid concerns swirl. Crude was hit by further technical selling as it fell below levels from just below the surprise OPEC cut.

Despite the drop in oil, the loonie was curiously strong. There wasn’t any domestic news and with crude down it doesn’t make sense to see the Canadian dollar so strong. It all argues for a strong component from flows.

In terms of news flow, the pound didn’t react well to the initial details from the UK budget as a number of tax hikes and spending cuts were rolled out. Even with that, debt to GDP forecasts barely improve over the forecast horizon. Gilts initially liked what they hear but there was a ‘sell the fact’ trade. As for GBP, it followed the broad USD trajectory and traded in between JPY and EUR.

Looking ahead, Japanese CPI is coming up followed by UK retail sales.