Forex today: stocks off a cliff ahead of FOMC
The US market was a mixed bag as the FOMC gets underway.
Stocks fell off a cliff with WTI dropping almost $2.00. The S&P 500 dropped from 2374 down to 2357 before making a partial recovery towards the close as investor jitters take a hold with the prospects of tighter money in an environment where real rates are falling and ahead of tomorrow's key CPI data.
The question on everyone's mind is whether the US economy offers a foundation for a faster pace of tightening and whether we will get any forward guidance from Yellen in tomorrow's presser. US yields in the 10-year are down 1.11% at 2.59% at time of writing and the USD is up just +0.38%, proving how fickle the market is and how soft the dollar is turning even in the face of a Fed hike tomorrow. As a result, the yen performed well in the US session up 0.1% vs the dollar.
The euro, on the other hand, took a technical beating and dropped to test the bull's commitments at the 1.0600 level from 1.0663 the highs. Soft data in European trade and EU political concerns have kept the bulls at bay and under pressure. Sterling recovered from the Brexit fear lows of 1.2108 to 1.2170 the session high. The commodity bloc shrugged off the decline in oil with the CAD, worse off, down just 0.3% in the end vs the dollar while the Aussie down 0.09% and the Kiwi down -0.04% vs the dollar.
In data, we had the largest advance in almost five years for the Producer Price Index. Final demand increased 0.3% in February, seasonally adjusted, while on an unadjusted basis, it rose by 2.2% in the 12 months to February.
Day ahead
Key events ahead: Dutch elections and FOMC - Westpac
For the ay ahead, we have the API and low tier release from Asia bar Japanese IP. However, European events with the Dutch elections along with the FOMC will be the highlights not to mention the US debt ceiling will be capped today (15th March US). Feb US CPI will also be an important release. "Feb CPI is expected to rise around 0.1% as a pullback in energy prices is set to offset continued at-target growth in core inflation of 0.2%. Annual headline and core inflation will remain above 2.0%yr," - analysts at Westpac
Main topics in U.S. session
- Oil: A return to $40-$42 cannot be ruled out - BBH
- EUR/GBP Intermarket: could a correction in U.S. stocks support the cross?
- IMF's Lagarde: Global growth has reached a turning point
- USD/CAD trims gains as crude oil recovers ground
- Gold stable above $1200, FOMC on sight
- USD/JPY: hit on all sides with stock markets tanking
- US PPI continues to climb higher - Wells Fargo
- GBP/USD posts lowest close since mid-January