FOREX: Very Volatile USD Swings as Trump Headlines on Fed Chair Dominate
Jul-16 16:44
- Initial price action on Wednesday saw the US dollar extend its cautious recovery, underpinned by prior US inflation data which showed signs of increasing passthrough to consumer prices from tariffs. However, volatile greenback swings then ensued as headlines surrounding President Trump’s potential intentions to fire Fed Chair Powell dominated global markets.
- Initial reporting suggested that President Trump indicated to Republican lawmakers that he will "likely" fire Federal Reserve Chair Jerome Powell soon, after receiving approval from them to make the move, a senior White House official told journalists. This prompted a severe reversal lower for the dollar, with the DXY dropping as much as 1.15% as short-term greenback longs were swiftly pressured. Alongside downside pressure for both equities and front-end US yields, USDJPY rapidly sold off to an intra-day low of 146.92, around 225 pips off the overnight highs.
- However, shortly after the significant greenback selloff Trump addressed journalists in the White House - appearing alongside PM of Bahrain – where he appeared to downplay these rumours, stating he was not planning on firing the Fed Chair and that reports of drafting a letter to fire Jerome Powell aren’t true.
- The USD snapped sharply higher as a result, although the USD index remains ~0.25% lower on the session ahead of the APAC crossover amid the heightened lingering uncertainty. USDJPY settled just above the 148 mark, down ~0.5% on the session.
- EURUSD has been equally volatile, trading a 1.1563-1.1721 range. The pair currently operates around 1.1640 as markets digest the latest developments in the US. The move down in recent sessions appears corrective and trend signals continue to highlight a dominant uptrend.
- A quick mention to GBPUSD which had a very limited reaction to firmer-than-expected CPI data on Wednesday. Late currency volatility also had less of an impact on GBP, ahead of key labour market data due Thursday. A close at current levels (1.3420) would keep the focus on the most recent breach of trendline support, drawn from the January lows.
- Elsewhere, Australian employment data and US retail sales will be highlights on the global calendar.
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US TSYS/SUPPLY: Preview 20Y Auction Re-Open
Jun-16 16:15
Tsy futures remain mildly higher ahead of the $13B 20Y bond auction re-open (912810UL0) at 1300ET, WI is currently at 4.932%, 11.5bp rich to last month's tail. Today's results will be available shortly after the competitive auctions closes at 1300ET.
- May auction recap: Treasury futures extended lows (TYM5 109-23.5 -15) after the $16B 20Y Bond auction (912810UL0) tailed, drawing a high yield of 5.047% vs 5.035% When-Issued yield at the cutoff; 2.46x bid-to-cover vs. 2.63x prior.
- Peripheral stats: indirect take-up at 69.02% vs. 70.7% prior; direct bidder take-up 14.07% from 12.3% prior; primary dealer take-up of 16.91% vs. 17.0% prior.
SOFR OPTIONS: Latest Call Structures
Jun-16 16:09
- Update, total 20,000 0QZ5 96.75/97.00/97.50/97.75 call condors, 6.0 ref 96.72/0.05%
- Block, 5,000 SFRV5 95.75/95.93/96.50 broken call trees, 2.5 net ref 96.125
OPTIONS: Expiries for Jun17 NY cut 1000ET (Source DTCC)
Jun-16 16:07
- EUR/USD: $1.1625(E1.3bln)
