Forex today: dollar in a chop, data miss, lower stocks and risk sentiment, yen firm

Forex today was weighed down by pooer risk sentiment yet again with US stocks making the third day of declines on the back of escalated trade war tensions, the downgrading of GDP estimates and poor economic data. 

US retail sales fell 0.1% in February, a big miss vs the 0.3% gain while at the same time, the retail control group, a subset used for GDP calculations, rose a mediocre 0.1% (0.4% expected), after a flat Jan outcome, prompting widespread Q1 GDP downgrades. The Atlanta Fed GDP tracking model trimmed its Q1 projection to 1.9% annualised from 2.5%.

The US 10yr treasury yield dropped from 2.85% to 2.81% with the 2yr yields chopping between 2.24% and 2.29% for little net change at 2.26%. Fed fund futures continued to price three more hikes by end-2018 and another hike in 2019.

EUR/USD opened the European session 1.2405 and drifted lower to 1.2364 on a dovish ECB, opening slightly higher in the NY session on a less negative IP number than expectations before rallying to the 1.24 handle on the retails sales miss. However, risk-off took off in the session and the yen caught a bid. Stocks fell and EUR/JPY dragged the euro down to 1.2345 before a close of 1.2380 when risk sentiment reversed again. 

Cable was meeting supply in Asia around the 1.4000 stop territory level at the Feb 27th high and slid back to 1.3943 in London before bouncing back to 1.3991 in early NY trade. Supply was triggered once again to fresh lows in the 1.3920 picking up demand back to 1.3977 for a NY close of 1.3970 within said range of 1.3991-1.3925.

The cross was better offered again ending NY at 0.8855, within a range of 0.8880-0.8845, with the downside favoured in respect to the divergence between the BoE and ECB. The BoE will meet again on the 22nd of this month while at the same time, 22/23rd, Brexit will be under the spotlight at the EU summit. 

USD/JPY was changing hands sub the 107 handle again in the European session between 106.39-106.75 while in NY, risk sentiment was poor and the yen picked up a bid taking the dollar down to 106.06 after the retails sales data and lower GDP forecasts. 106.38 was the session high where the yen traded sideways into the close with the range stuck between the 21 and 10-D SMA.

As for the higher betas, with a bounce in the CRB and a better climate for commodities on Wednesday, the Kiwi stuck to a sideways range between 0.7320 and 0.7355, (dropping in early Asia on GDP miss), while the Aussie extended the upside to a high of 0.7917 and the highest level since 21 February. However, risk weighed in NY and the pair fell back to 0.7870/80 as US stocks fell.

Key notes from US session :

The GDPNow model estimate below now 2%

Key events ahead:

Analysts at Westpac noted the day's key events as follows: "In Asia we see Feb trade data from Indonesia and India, plus Philippines Jan remittances data.

The US data calendar is crowded, though mostly with Feb sentiment surveys unlikely to have a major market impact. These include manufacturing (New York “Empire State” and Philadelphia Fed) and housing (NAHB Housing Market Index). The general mood should remain upbeat. Late in the NY session, US Treasury releases Jan data on capital flows. It will be interesting to see if the weakness in the US dollar in January coincided with further foreign selling of treasury debt."