Forex news for New York trade on August 10, 2017:
- Trump: Maybe 'fire and fury' warning to North Korea wasn't tough enough
- Fed's Dudley: Sees inflation rising toward 2% goal over medium term
- Dudley: Going to take some time to get inflation to 2%
- US July Federal budget deficit $42.9B vs $52.0B exp
- US 30-year bonds sell at 2.818% vs 2.820% WI
- Canada June new housing price index +0.2% vs +0.5% m/m expected
- US initial jobless claims 244K vs 240K estimate
- July US producer price index +1.9% vs +2.2% y/y expected
- UK NIESR July GDP estimate +0.2% vs +0.3% exp
- Crude output rose in July - OPEC report
Markets:
- S&P 500 down 36 points to 2438
- Gold up $8 to $1286
- WTI crude down $1.09 to $48.46
- US 10-year yields down 4.7 bps to 2.20%
- JPY leads, NZD lags
The market was hit by a classic case of risk aversion on Thursday on worries about North Korea. Trump piled on late in the day and that's when stocks rolled over after teetering earlier. The poor performance of tech stocks didn't help.
The risk aversion kept a broad bid in the yen and sent USD/JPY down to 109.20, below the April/June trendline and a few other support levels. Other yen crosses also took a beating.
It was wasn't a pure risk trade as the US dollar lost a bit of ground on a weak PPI and mixed comments from the Fed's Dudley, who seemed to both indicate that inflation will rise but that it won't hit 2% in the medium term. EUR/USD climbed to a two-day high of 1.1780 and finished at the best levels of the day.
USD/CAD dropped to 1.2675 from 1.2725 as oil ramped up over $50 early but oil then reversed and so did USD/CAD. The pair rallied to finish at 1.2737 as oil plunged to $48.48 on Russian talk of turning the taps back on.
For all the pain in the stock market, the FX moves were generally contained. Even NZD/JPY fell only 1.6% on the combination of the RBNZ and risk aversion.
Zooming out, you have to assume that this call from Gundlach on the VIX really had an effect. In any case, gotta give him credit with the trade up 60% in two days.
