- Talk of a US rate hike boosts greenback against G3
- '103.25 is the big trigger in USDJPY': Hardy
- ECB taper talk sees gold post largest declines in three years
- Core bond yields spike on surprise hawkish note from Frankfurt
- 'The ECB report still does not rule out an extension of QE': Boye
Given this, it is perhaps understandable that investors keep coming back to the US dollar, even as the Federal Reserve dithers and scrapes past chance after chance to normalise policy.
The greenback rally that is sweeping world markets is an extension of this half-desperate hunt for a retreat from the stimulus narrative, and comes on the back of Chicago Fed president Charles Evans telling press in Auckland that he would "be fine" with a December hike provided macro data and inflation continue to show signs of strength.
As hawkish words go, it was a pretty hedged and low-flying example of type, but it is not as if traders seeking some sort of step back from continual stimulus have much to pick from.
"The USD is very strong across the board right now," said Saxo Bank head of forex strategy John J Hardy on today's Global Morning Call
, noting that USDCHF and USDJPY are two of the more interesting pairs amidst the greenback's surge.
In terms of the former, Hardy notes that the Swiss franc is one to watch versus USD on a continuation of the higher rates theme. "Yesterday saw dollar/Swiss poke its head above the 200-day moving average," says Saxo's FX head, adding that 99.50 and parity are the levels to watch to the upside.
In terms of USDJPY, Hardy reports that 103.25 is the "big trigger" to keep an eye on as the dollar ascends versus a stimulus-soaked Japanese yen.
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Source: Saxo Bank
Interestingly, yesterday saw not one but two significant steps away from the money-printing regime as the European Central Bank was also out with a report stating that it could potentially wind down its bond-buying prior to the planned conclusion of the current QE programme next March.
"The talk of an ECB taper impacted fixed income markets heavily yesterday," says Saxo Bank bonds trader Michael Boye, who cautions, however, that the report did not rule out an extension of the bank's QE regime, and may represent a simple "testing of the waters" by the ECB.
"Nevertheless," says Boye, "core European yields jumped on the news and continue to rise with the 10-year German bund yield completing a 10 basis point move to minus 0.05%.
The combination of less-dovish words from the two major central banks led gold to its largest drop in three years as investors confirmed yesterday's breach of the $1,300/oz level and pushed gold to an early-morning low below $1,270/oz.
"Keep an eye on open interest here," says Saxo Bank head of commodity strategy Ole Hansen; "fluctuations in the net-long position [will be key for investors looking to gauge gold's strength]".
According to Hansen, the $1,266/oz level is likely to act as support here in the short term.
In crude markets, Hansen tells us that WTI is looking towards $50/barrel today with Brent moving towards $52/b. Oil was boosted by yesterday's API figures that showed an unusually strong draw on refinery supplies while today's EIA data are projected to show a one million barrel rise in stocks.
Could it be? Photo: iStock
Editor’s note: From the Floor takes advantage of TradingFloor.com's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.