Overview
The USD-index continued its descent in the first half of European trade with downside further exacerbated by unsurprising dovish comments from Fed’s Evans who suggested that the Fed are in no rush to hike rates for the first time in 9 years and added that he favours a rate hike in 2016. Meanwhile, the greenback came under further pressure following the lacklustre US Durable Goods Orders (Feb) M/M -1.4% vs. Exp. 0.2% as some analysts attributed the weaker headline number to the overall strength in the USD dampening appeal for USD-denominated goods. However, heading into the European close, the USD bounced off session lows to partially retrace some of its earlier weakness after a NY times Q&A article which featured FOMC member Lockhart, who said that he will vote for a rate hike by September at the latest.
The broad based USD weakness supported major pairs with EUR/USD once again briefly breaking the 1.10 level, further buoyed by the strong German IFO Business Climate (Mar) M/M (107.9 vs. Exp. 107.3) release. Of note, the pair has failed to sustain the move above that level multiple times this week as TFX sources noted talk of Asian names on the offer at the 1.10 handle. Elsewhere, comments overnight from BoE’s Shafik suggesting that the next move from the central bank is likely to be in the form a rate hike coupled with the subsequently softer USD put GBP/USD on the front foot as the pair temporarily reclaimed the 1.4900 handle.
Overnight, NZD was the session’s laggard after NZ February trade balance data showed the widest deficit in more than 5yrs (12-Month YTD -2.18bln vs. Exp. -1.85bln) and weakness was also seen in AUD following the RBA Financial Stability Review which prompted markets to tweak expectations of a rate cut to 61% at the Apr. 7th meeting vs. 49% before the release. However in the latter half of the European session, antipodean currencies clawed back earlier losses at the expense of the weakened greenback.
Looking ahead, tonight sees comments from ECB Weidmann who is to speak in Munich after market, while tomorrows’ data slate sees the release of UK retail sales, US Initial Jobless Claims and Japanese Jobless rate and retail sales.