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John J Hardy
Saxo Bank’s head of FX strategy John Hardy takes a closer look at trends and moves in today’s forex charts, including EURUSD, USDJPY, AUDUSD, and EURSEK.
Article / 13 March 2018 at 21:30 GMT

US Wrap: Trump 'fires' risk aversion flare

FX Trade Strategist / www.Loonieviews.net
Canada
  • US inflation meets expectations 
  • Bank of Canada's 'cautious' outlook sinks loonie 
  • Donald Trump replaces Secretary of State with CIA Director 

By Michael O’Neill

NY focus: This morning’s US inflation data was expected to be the key trading metric for FX markets. It wasn’t. Instead, in what some describe as the “moron’s revenge”, US President Trump (once rumoured to have been called a moron by the Secretary of State) used his Twitter account to fire the guy. Rex Tillerson was replaced by CIA Director Mike Pompeo.

Before that news, it was inflation data time. February CPI rose 2.2% (forecast 2.2%), a tick higher than January’s 2.1% result. Core CPI rose 1.8% (forecast 1.8%). FX traders were not overly impressed.

EURUSD rallied from 1.2333 before the inflation data to 1.2385 afterwards and then extended the move to 1.2406 after Tillerson was fired. In the same period, USDJPY dropped from 107.27 to 106.46.

USDCAD dipped to 1.2832 after the inflation data, but the risk aversion shift boosted prices to 1.2930. Then, Bank of Canada Governor delivered a dovish speech, emphasising the need to cautiously unwind stimulus. USDCAD rallied again and finished the session within spitting distance of 1.3000. The Aussie and kiwi slipped but only marginally.

Oil prices were whippy. A morning rally from $60.76/barrel to $61.94/b evaporated on the Tillerson news and prices plunged to $60.26/b before recovering to $60.71/b at day's end.

Wall Street was not happy with the White House actions. The three major indices traded lower all day led by a 1.02% drop in the Nasdaq.

Wednesday focus: Eurozone data and speeches by European Central Bank President Mario Draghi, Chief Economist Peter Praet and ECB Governing Council member Benoit Coeure should provide EURUSD direction. Eurozone data due out today includes employment and industrial production. 

EURUSD is in an uptrend while prices are above 1.2310, supported by today’s break above 1.2360. A break above 1.2450 will extend gains to 1.2550.

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 Fired ... traders flipped to 'risk-off' mode when US President Donald Trump replaced his Secretary of State. Photo: Shutterstock

EURUSD four-hour
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Source: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more 

– Edited by Gayle Bryant

Michael O'Neill is an FX consultant, 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.

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