FOREX: USD Index Rises to Fresh Recovery Highs Amid Sentiment Boost/Patient Fed
May-08 16:59
- Major equity indices have rallied significantly on Thursday as progress on trade talks/deals provides a more constructive tone for risk sentiment. Outperformance for the US benchmarks is providing a firm underlying bid for the US dollar, with the patient FOMC providing an additional greenback tailwind.
- As a result, the ICE dollar index has risen to fresh recovery highs above 100.50, with the index looking likely to close above its 20-day EMA, the first daily close above this average since February 28 and undoubtedly a bullish development.
- The renewed dollar optimism has been most pronounced against the Japanese yen, particularly benefiting from the 10bp move higher for front-end US yields and the boosted risk backdrop. The 1.3% USDJPY rally has seen the pair narrow the gap substantially to the post-BOJ highs at 145.92, and the key 50-day EMA resistance, intersecting at 146.23. A breach of this average would signal scope for a stronger recovery towards 148.27 (Apr 9 high) and 149.28 (Apr 3 high).
- EURUSD (-0.65%) has printed fresh pullback lows at 1.1221 on Thursday, as downside momentum extended below the May 01 low of 1.1266. The 20-day EMA has also remained key on the EURUSD chart, having supported the pair extremely well since the break higher in early March. A close below 1.1279 would signal scope for a deeper pullback, initially looking for 1.1144, the April 03 high.
- GBP relatively outperforms following a hawkish lean to the May BOE decision. Two votes for an unchanged decision were a surprise, and the seemingly close call for the majority who voted for a 25bp cut garnered support for GBP. The stronger dollar helped cable reverse back to pre-BOE levels, however the half a percent decline for EURGBP remains noteworthy.
- China trade data, Canadian employment and comments from FOMC members will be highlights on the Friday economic calendar.
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US TSYS: Risk-On Tone Evaporating
Apr-08 16:52
- Treasury futures climbing off lows after WH confirms 104% added tariff on China went into effect at noon, WH press sec Leavitt adds additional tariff to be collected starting tomorrow.
- Buyer 15,000 TUM5 up to 103-30.5 last few minutes, while contract trades 103-29.5 last (-.62), TYM5 -4 at 111-30, 10Y yield slips to 4.1624%.
- Still bid, stocks pare gains with SPX eminis falling to 5127.5 vs. 5305.25 high recently trades, 5147.0 last. Bbg US$ index -2.49 at 1269.07.
OPTIONS: Large Euribor Call Fly Sale, Schatz Put Spread Buy Tuesday
Apr-08 16:52
Tuesday's Europe rates/bond options flow included:
- DUK5 106.70/106.50ps, bought for 1.5 in ~11.9k
- OEK5 118/117 put spread, bought for 19.5 in 4.5k
- RXK5 130.50/134.00cs sold at 74.5 in 3k
- ERK5 97.6875/97.8125ps, bought for 1.75 in 2k
- ERU5 99.25/95.62/100.00c fly, sold at 0.25 in 15k
- SFIK5 96.30/96.40cs, bought for 0.75 in 8k
TARIFFS: White House Confirms 104% Tariffs On China To Start Apr 9
Apr-08 16:49
- "WHITE HOUSE PRESS SECRETARY SAYS 104% TARIFFS WENT INTO EFFECT ON CHINA; ADDITIONAL TARIFF WILL BE COLLECTED STARTING APRIL 9 -FOX BUSINESS REPORTER" - RTRS
- It helps ESA continues to reverse gains (having now dropped 150 points from session highs, +1.1% on the day) and USDCNH at 7.3965 back close to session highs of 7.3981.
