Action Insight

Dollar recovered overnight with the help of surging treasury yields. 10 year yield hit as high as 2.725 before paring gains to close at 2.696, up 0.034. That's also the highest level since April 2014. Nonetheless, the lift to the greenback would likely be temporary as Dollar and yields would likely go back to the "decoupled" relationship fairly quickly. British pound is trading as the weakest for the week. Renewed Brexit uncertainty is seen as a factor weighing on Sterling. But it's actually more about returning to reality after last week's utopic rally. For today, New Zealand Dollar is trading mildly higher after trade balance data.

Dollar's recovery continues in early US session and is gathering some extra momentum against Sterling and Euro. But still, there is no clear indication of near term trend reversal yet. Meanwhile, Sterling is under broad based selling pressure. Profit taking after recent strong rally is one of the reasons. Additionally, the pound is weighed down by re-emerging political uncertainties in the UK. Elsewhere in the FX markets, Euro is following as the second weakest one. Kiwi and Aussie are also soft.

The forex markets are pretty steady in Asian session today as markets are preparing for an extremely busy week ahead. Dollar is trying to recovery. While the greenback is trading broadly higher, it's kept in Friday's range. There is no realistic sign of short term bottoming yet. There are countless important data to be released this week, including PCE, ISM and NFP from the US. FOMC is also expected to deliver a hawkish twist to prepare the markets for March hike. But US President Donald Trump's tone regarding Dollar in the State of Union address could be the trend defining moment.

Dollar ended the week broadly and deeply lower as recent selloff intensified. It should be noted again that the current fall is the continuation of the down trend that started back in January 2017, that is, since US President Donald Trump took office. And that happened despite Fed's three rate hikes last year. DOW gained more than 30% in the period. 10 year yield struggled in most of 2017 but finally surged through a key resistance level at 2.621. Data released during the period showed solid underlying momentum in the economy, except sluggish inflation. Even though Q4 GDP missed expectation, 2.6% annualized growth is still respectable. Fed is more on track for three hikes this year, starting March.

Dollar stays steadily in range in early US session after mixed economic data. Q4 GDP showed only 2.6% qoq growth, missing expectation of 3.0% qoq. Though, GDP price index rose 2.4%, above expectation of 1.3%. Headline durable goods orders rose 2.9% in December, well above expectation of 0.9%. Ex-transport orders rose 0.6%, inline with consensus. Trade deficit widened to USD -71.6b in December. Wholesale inventories rose 0.2% mom in December.

After being pressured for most of the week, Dollar is trying to stabilize after US President Donald Trump said he wants a strong Dollar. But so far, there is little sign of sustainable rebound yet. The greenback is still vulnerable to another selloff. The key to whether Dollar could reverse recent fortune might lie in Q4 GDP. Sterling remains one of the strongest one this week and will also look into UK GDP for more strengthen. Euro jumped overnight after ECB President Mario Draghi's comment but there was no follow through buying.

ECB left the policy rates unchanged, with the main refinancing rate, the marginal lending rate and the deposit rate staying at 0%, 0.25% and -0.40% respectively. The pace of asset purchases also stayed unchanged at 30B euro per month until September, or beyond, if necessary. President Mario Draghi attempted to downplay speculations that the central bank would soon adjust the forward guidance, as interpreted by many following the December meeting minutes. Meanwhile, he stressed that any rate hike would be 'well past' the end of asset purchases. Draghi also warned of the impacts of the strong euro on growth and complained about the US for talking down the greenback at the World Economic Forum.

Euro surges as being boosted by ECB President Mario Draghi's comment. In his remarks, Draghi said that "incoming information confirms a robust pace of economic expansion, which accelerated more than expected in the second half of 2017." And, "the strong cyclical momentum, the ongoing reduction of economic slack and increasing capacity utilisation strengthen further our confidence that inflation will converge towards our inflation aim of below, but close to, 2%".

Dollar stays weak in Asian session as the broad based selloff is extending. Dollar index broke 90 handle for the first time in more than three years after US Treasury Secretary Steven Mnuchin's comment that a weak dollar is good for trade. One explanation for recent weakness of the greenback is that global central banks would be starting to follow Fed's path of tightening. And that kept Dollar soft ahead of this week's BoJ and ECB meeting. However, the downside acceleration since Mnuchin's comments could now be taking the selloff to another level. In particular, markets would be looking forward to comments from ECB president Mario Draghi in the post meeting press conference. Any hawkish flavor in Draghi's message could prompt another round of sell-off in Dollar.

Dollar's broad based selloff resumes today as traders hit the accelerator. The key factors behind are improving economic outlook in other major economies. At the same time US Treasury Mnuchin's backing of a weaker dollar is triggering the acceleration. While economic data from Eurozone continued to be solid, it's following Dollar as the second weakest one. Sterling emerges as the strongest one today as data suggest faster wage growth. Aussie and Kiwi come as second and third.

Japanese Yen trades broadly higher today as supported by upbeat economic data. In particular, USD/JPY has now taken out 110.18 support (last week's low). Recent fallcould be extending towards next key support level at 107.31. Dollar is again back under pressure with weakness most notable against Sterling. In other markets, Nikkei is trading in red by -0.6% at the time of writing. That followed mixed US markets. S&P 500 and NASDAQ extended the record runs but DOW closed flat.

Yen continues today trade as the strongest major currency today as supported by relatively more upbeat BoJ. Dollar is also trying to rebound, in particular against Aussie but is outshone by both Yen and Swiss Franc. Confidence data from Germany is very upbeat but provides little support to Euro. Traders are getting a bit more cautious ahead of ECB rate decision and press conference on Thursday. Meanwhile, Aussie is trading as the weakest one on concern of more weakest in iron ore prices ahead..

BOJ again voted 8-1 to leave the monetary policies unchanged in January. The targets for short- and long-term interest rates stay at -0.1% and around 0%, respectively while the guideline for JGB purchases remains at an annual pace of about 80 trillion yen. As a ritual since he has joined the Board in September 2017, Goushi Kataoka has dissented again. The central bank has turned more upbeat on the inflation outlook although the members left the GDP growth and inflation forecasts unchanged for fiscal years from 2017 to 2019. At this meeting, the members also voted unanimously to extend for one year new the applications for the fund provisioning measure to achieve certain the goals such as stimulating bank lending and supporting economic growth.

Yen spikes higher after BoJ turned slightly optimistic over the country's inflation outlook. But there is no follow through buying seen. USD/JPY is kept in middle of range of 110.18/114.17. Dollar also recovers mildly after US government reopens. But overall, the greenback is staying in near term down trend against all major currencies. In other markets, risk appetite stays strong. DOW hit another record by gaining 0.55% to 26214.60. S&P 500 and NASDAQ were even stronger, closed up 0.81% and 0.98% at record highs. 10 year yield extended recent rally by rising 0.028 to 2.665. A take on 3% handle is now having realistic possibility.

Dollar trades broadly lower today as the shutdown of US government extends into the third day. But loss is limited as it's held above Friday's low. Reactions in other financial markets are also muted. Euro is getting some support from positive political news from Germany, as well as an upbeat Bundesbank monthly report. But Sterling, Aussie and Kiwi are trading firmer. In particular, EUR/GBP dips through last week low and could be accelerating towards recent low at 0.8688.

Market reactions to the US government shutdown is rather muted. Dollar is trading generally lower today but is held within Friday's range. Asian markets are pretty steady with Nikkei trading down just -0.14% at the time of writing. The Senate was in session yesterday but failed to deliver any breakthrough. The shutdown is extending into its third day and there is no sign of a resolution in the Senate yet. A procedural vote is expected at noon today. But there are unlikely enough votes to pass the bill to keep government running through February 8. For forex traders there are so many key events ahead in the week that they couldn't care less regarding the government shut down.

Dollar ended the week broadly lower, except versus Canadian Dollar. The Loonie was pressured after the "dovish" BoC rate hike which indicates cautiousness of next move. On the background, there was also a lot of uncertainty surrounding NAFTA renegotiation. Euro and Yen followed closely as the third and fourth weakest, ahead of BoJ and ECB meeting. On the other hand, Sterling ended as the strongest one as markets are increasing optimistic on the Brexit deal. Indeed, businessmen and investors could be starting to prepare for a smooth Brexit transition. Australian Dollar followed as the second strongest as solid job data boosts the chance of a rate hike in the second half of the year.

Dollar is trying to recover again as markets are heading for weekly close. But the greenback is overwhelmed by the rebound in Yen. There was some concerns over US government shut down. But with the spending bill passed in the House already, vote in the Senate should be...

China's economic activities ended last year with a strong tone. GDP growth expanded +6.8% y/y in 4Q17, beating consensus of +6.7%.Serctor-wise, growth in the services sector accelerated to +8.3%, from +8% in the third quarter. By contrast, growth in the manufacturing sector slowed to +5.7% y/y from 6%...

Sterling continues to trade as the strongest major currency for the week. Fundamentally, focus will turn to retail sales data to be published today. Technically, GBP/USD should have already taken out 1.3835 key resistance. GBP/JPY also broken 153.66 near term resistance for rally resumption. The next to be watched is 0.8688 support in EUR/GBP, which is still a bit far away from the current 0.8810 level.