Forex news for North American trading on February 17, 2021.
- Dow leads the way for the 2nd consecutive day
- Crude oil tests session highs after the toward 100 hour moving average stalls
- FOMC minutes: Staff implied a considerably stronger outlook for 2021 relative to the Dec forecast
- US treasury auctions off $27 billion of 20 year bonds at 1.9200%
- More from BOE Ramsden: BOE is ready to implement simple negative rates
- European shares end the day in the red
- BOE Ramsden: Current policy remains appropriate
- Manchin told Biden he won't force through minimum wage hike if it's afoul of Byrd rule
- Bitcoin trades above and below a topside trend line but remains above $50,000 level
- Fed's Rosengren: Economy set up for better second half of the year
- US December business inventories +0.6% vs +0.5% expected
- NAHB US Feb housing market index 84 vs 83 expected
- Fed's Barkin: I'm optimistic for 2021 but fiscal package helps
- US January industrial production +0.9% vs +0.4% expected
- Saudi Arabia set to reverse recent unilateral production cut - report
- Swiss gov't proposes boosting aid for firms to CHF10 billion
- US January advance retail sales +5.3% vs +1.1% expected
- US PPI final demand for January 1.3%% vs. 0.4% estimate
- Canada January CPI +1.0% vs +0.9% y/y expected
- The USD is the strongest and the NZD is the weakest as NA traders enter for the day
The US retail sales for the month of January came out sizzling hot at +5.3% vs. 1.1% expected. The other measures including ex auto, ex auto and gas and the control group also showed big beats (the control group rose 6.0% vs. 1.0% expected. The move corresponded with the $600 stimulus check received by millions of consumers. Electronics and appliances so the biggest increase with a gain of +14.7%
Also higher today was the producer price index or PPI which advanced by 1.3% vs. 0.4% estimate (for January). The gain was a largest since 2009. The sharp rise suggests inflation at the door of the factory was on the upswing and could be a leading indicator for a push higher in consumer prices down the road. The gain was led by a 1.3% rise in the price of services which was the biggest gain since December 2009. The cost of good also showed a strong 1.4% gain. With the price of commodities continued to move higher, expectations for higher producer prices can be expected going forward as well.
The combination of the retail sales and the producer price index could lead to higher expectations for inflation down the road. Yields on treasuries have been moving higher with the yield curve steepening as well. That dynamic offer is indicative of the markets expectations for higher inflation. The shorter end yields however remain near record low yield levels as the Federal Reserve has suggested that rates would stay low for an extended period of time with the Fed less concerned about inflation and more concerned about seeing employment move back toward pre-crisis levels.
In other data, industrial production and capacity utilization was also stronger than expectations, and NAHB housing market index inched up to 84 from 83.
In the forex market, the JPY was the strongest of the majors as investors moved into the "relative safety of the JPY". All the JPY crosses were lower (higher JPY) led by the CHFJPY (-0.86%) and the EURJPY (-0.67%). The USD was mostly stronger as well with most of its gains vs the CHF (+0.72%), the EUR (+0.52%) and the NZD (+0.36%). The greenback was near unchanged vs. the CAD and AUD, and down vs vs the JPY (-0.15%). The better data helped to support the buck.
Despite the stronger retail sales and PPI data, yields along the treasury curve fell with the yield curve flattening for change. The moves can be attributed to some flows out of the higher flying stocks (Nasdaq and Russell 2000 declined) and into the treasuries. Both the 10 year and 30 year yields traded to cycle highs (highest levels in a year) with the 30 year reached 2.11% at the highs today (closing near 2.05%). Although traders lowered yields today, it did not spillover into the 20 year bond auction. The treasuries $27 billion auction was sloppy at best with a 2.3 basis point tail (1.92% vs 1.897 WI level). That makes one wonder if the fall in yields was more of an aberration vs. reality. We will see going forward.
In other markets,
- Spot gold fell some $18 on the back of the higher dollar today. The price low reached $1776.13. That was just above the swing low from December 1 (and the lowest level since July) at $1764.80 read the current price is trading at $1776. WTI crude oil futures
- WTI crude oil futures had an down up down and back up day, as the Arctic freeze the US sent prices initially higher, but headlines that Saudi was set to reverse the unilateral production cuts sent the price down toward a retest of its 100 hour moving average. After support held, the price reversed back higher and is currently trading at new session highs at $61.73.
- The price of bitcoin moved above the $50,000 level and stayed above. The digital currency reached an all time high price of $52,584.95
