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USD ran into selling pressure last night, even though strong CPI and retail sales data increased odds of Fed tightening in March to 50%; NZD also up against EUR, JPY and GBP

Currencies
USD ran into selling pressure last night, even though strong CPI and retail sales data increased odds of Fed tightening in March to 50%; NZD also up against EUR, JPY and GBP

By Jason Wong

The global reflation trade continued on the release of strong US CPI and retail sales data – higher equities, a stronger USD and higher Treasury yields – but the move hasn’t been entirely sustained.  The USD ran into some significant selling pressure and is now lower for the day, while, US equities and yields are off their peaks.

Strong US CPI and retail sales data set the tone for the start of the US session as they increased the odds for the Fed tightening next month to just under the 50% mark.  The currency reaction was fairly modest, with the USD major currency TWI rising by about 0.2% following the result before running into selling pressure and it is now down slightly for the day. There was no obvious reason for the reversal in market direction.  Yellen repeated her testimony of yesterday to the Senate and faced a different set of questions, but nothing new has come out of that.

So this morning the NZD is trading close to the 0.72 mark, having dipped below 0.7150 after that US data.  The lack of follow-through in the USD this morning suggests a possible easier path for the NZD to make a further recovery over coming days.  The Fed’s Dudley gives a speech this afternoon and he might offer his perspective on recent data.  Typically he has been on the dovish side of the ledger.

The AUD followed a similar path to the NZD and broke up through the 0.77 mark this morning, albeit only just.  NZD/AUD has been range bound over the past 24 hours and currently sits at 0.9360, near the lower end of the well-established 0.93-0.97 range.  Australian employment data this afternoon always provides the opportunity for some intra-day currency volatility.

EUR rose up to the 1.06 mark after trading as low as 1.0520 this morning.  GBP and JPY have followed similar paths, suggesting that the USD has been in the driving seat.  The outperformance of the NZD sees NZD/EUR up through 0.68, NZD/JPY up through 82 and NZD/GBP knocking on 0.58.


 

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