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Mar 05 - 03:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Holds Firm As Dollar Wobbles On ISM

By Paul Spirgel  —  Mar 05 - 01:40 PM

The USD index traded 0.1% lower by NorAm afternoon trading though it had clawed back steeper losses that followed below-forecast factory orders and ISM non-manufacturing data, which resuscitated expectations for a more dovish Fed path in 2024.

The soft data preceded Wednesday’s ADP and JOLTS data, which will be released as Fed Chair Jerome Powell begins his semi-annual monetary policy testimony before the House Financial Services Committee.

For now, markets and Fed dot plot expectations are in sync, but that could change if upcoming data paint a softer economic picture or Powell's testimony were to suggest less reluctance to cut interest rates, which would weigh on yields and send the dollar lower.

EUR/USD was trading +0.04% in afternoon trade, below its post-data high of 1.0876.
The reaction to the soft U.S. data was somewhat muted as traders suspect the ECB would likely follow the Fed if the U.S. central bank were to pivot more decisively toward lower rates.

USD/JPY fell to a 149.70 low after the soft ISM data, from early NorAm highs by 150.43.
The lower Treasury yields that followed the soft data inspired some convergence in U.S.-Japan rate spreads, spurring dollar sales.
Traders remain wary of recent USD/JPY highs by 150.88 as there is mounting BoJ rate normalization talk surrounding the bank's March 19 meeting.

GBP/USD broke above daily cloud top resistance at 1.2709, and recent trend high 1.2710, rallying to 1.2735 after ISM.
The pound was at 1.2715 in NorAm afternoon trade.
A close above the daily cloud would add to the bullish tone as U.S.-UK diverge owing to persistently high British inflation which is likely to keep the BoE from pivoting to lower rates at the same time and pace as the Fed.

AUD and CAD were steady near flat as the soft U.S. data hints at a lower trajectory for global growth.
Oil and copper eased a touch in line with the low-growth narrative.

Bitcoin made a new all-time-high at $69.2k before falling to $65.3k to end the session.
Gold also put in a new record high at $2,141.59 before slipping to $2,130 in New York afternoon trade.
Lower global yields helped boost USD-alternatives, with bitcoin bid on ETF-related buying.

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Refinitiv IFR Research/Market Commentary


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