Article / 28 February 2017 at 22:17 GMT

US Market Wrap: FX markets yawn at US data dump

FX Trade Strategist / www.Loonieviews.net
Canada
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Watchlist

  • Japan: Retail Trade (2350 GMT) 
  • Industrial Production (2350 GMT) 

US data released

  • GDP Q4 (Actual 1.9% vs. forecast 2.1%) 
  • Wholesale Inventories (Actual -0.1% vs previous 1.0%) 
  • Q4 PCE (Actual 1.9% vs forecast 2.2%, Core 1.2% vs. 1.3%) 
  • S&P Case-Shiller Home Price Index – December (Actual 5.6% vs. forecast 5.3%, y/y) 
  • Chicago PMI – February (Actual 57.4 vs forecast 53.0) 
  • Consumer Confidence – February (Actual 114.8 vs. forecast 110.9) 
  • API Crude Stocks Change (Actual 2.5 million barrels vs. previous 0.994 m/b) 

There was a lot of quality US economic data to sift through on Tuesday and normally that would set the tone for FX markets. Except it’s not normal (US President Donald Trump has seen to that) so that data didn’t have much of an impact on trading.

Tuesday’s economic reports merely served to pad both sides of the US rate-hike argument. Hawks will tout the improvement in consumer confidence, the surge in Chicago PMI and a bump in home prices. Doves will coo about the miss in GDP and PCE.

Month-end madness was in full swing with big gains in US equity indices in February compared with international indices fuelling US dollar selling for the 1600 GMT fix.

EURUSD rose from 1.0586 to 1.0629; GBPUSD climbed from 1.2405 to 1.2468 and USDJPY dropped from 112.27 to 111.68. Those moves were completely erased in the afternoon and EURUSD and USDJPY currencies closed virtually unchanged from the open. GBPUSD had a small loss.

The antipodeans traded in a similar fashion. AUDUSD moved from 0.7665 to 0.7692 and then retreated back to 0.7660 at the close. NZDUSD started at 0.7195, and climbed to 0.7234 before dropping to 0.7195.

The Canadian dollar was the odd man out. USDCAD selling from month-end portfolio rebalancing was overwhelmed by very “chunky” USDCAD buying as a result of the closing of the Enbridge/Spectra energy merger. Apparently, the US shareholders (fund managers) holding Spectra Energy did not want Canada’s Enbridge in the portfolios.

Reuters reported that San Francisco Fed President John William’s said: "In my view, a rate increase is very much on the table for serious consideration at our March meeting. We need to gradually ease our foot off the gas in order to avoid a 'too hot' economy that in the end isn’t sustainable." Unfortunately, all ears are tuned to President Trump's upcoming speech.

Wall Street closed in the red. The Dow Jones Industrial Average ended its winning streak of 12 consecutive record closes with its 0.12% decline today.

Oil prices dropped in the morning, falling to $52.10 from $52.90. They recouped all the losses in the afternoon. Prices dipped in after-hours trading when API reported another weekly increase in crude inventories.

;l;l
 A big yawn. US data released on Tuesday had little impact on trading. Photo: Shutterstock

Opinion

President Trump's speech may be key to a March rate hike writes TradingFloor contributor Neil Staines in: Waiting for Trump(ot).

– Edited by Gayle Bryant

Michael O'Neill is an FX consultant and currency strategist and author of the Trade of the Day at Loonieviews.net. Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.

Missed a day? Here’s what we had to say during our Asia session, our regular European Morning Markets, From the Floor and Mid-session Europe.
3y
John Shaw John  Shaw
John Williams is on crack to make such a stupid statement like that " We need to gradually ease our foot off the gas in order to avoid a 'too hot' economy that in the end isn’t sustainable."

They need to raise raise to put a little dry power away for when the shit really hits the fan bud.
3y
John Shaw John  Shaw
raise rates
3y
Michael O'Neill Michael O'Neill
The FED is a tad over cautious
3y
Michael O'Neill Michael O'Neill
What is it, now, 10 years of sub 1% rates?
3y
John Shaw John  Shaw
Could be negative? LOL
I was just talking to some staff here in Ohio at lunch about rates. If mortgages jump even 1.5 - 2 points it will wipe out a lot of people and the public debt specter here is insane.
Fun times ahead bud.
3y
Michael O'Neill Michael O'Neill
And think of those 84 mth car loans
3y
John Shaw John  Shaw
LOL When the cars are junk at 48 months.
3y
Andrew Perkins Andrew Perkins
Hi Michael just a quick one do you see the USDCAD coming back off the 1.3320 resistance or a move up and past
3y
Michael O'Neill Michael O'Neill
Hi Andrew
Sorry for the late response. (its early here). USDCAD is already at 1.3334 and I see it rallying to 1.3380 and then 1.3450. It's due to M &A flow hangover, Long CAD spec positions getting squeezed and high expectations of March rate hike

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