BLBG: Dollar Declines Before Yellen Testimony; Pound Slides
Euro one-day volatility rises with U.S. prices under focus
Australian dollar leads gains as data, iron ore support
The dollar dropped versus most of its Group-of-10 peers before Federal Reserve Chair Janet Yellen testifies to the Senate Banking Panel in Washington later Tuesday, while the pound declined after U.K. consumer-price inflation data missed economistsâ€™ forecasts.
Britainâ€™s annual inflation rate increased 1.8 percent in January, still 0.2 percentage points below the Bank of Englandâ€™s target and falling short of the 1.9 percent estimated in a Bloomberg survey. Sterling dropped as much 0.7 percent to $1.2444; spot movements in cable remain choppy as conviction on the pair is low among investors while the pound remains sensitive to various headlines, varying from Brexit negotiations, to U.S. politics and price growth.
Talking about inflation, what could be of equal importance to dollar traders along with Yellenâ€™s testimony is the release of U.S. consumer-price data due Wednesday; these risk events have increased costs for those who wish to hedge over one-day euro price swings to the highest in almost two weeks.
Risks on Yellen may be lying on the hawkish side for the greenback even if she just keeps all options open for the Fed. While reflation-trade allure has picked up lately and market implied probability of a March interest-rate hike rose to 30 percent compared to 24 percent a week ago, the dollar has retraced just a fourth of its 2017 drop. Flows Tuesday were mostly muted, with some short-term investors offloading dollar longs, according to Europe-based traders.
EUR/USD sees muted flows as it manages to pare large part of Monday losses even after it closed below its 55-DMA for the first time in almost a month; pair largely unfazed by euro area growth and German ZEW data, holds above 1.0600
There is mixed interest sub-1.0590, with bids and stops extending down to 1.0570; offering interest by leveraged investors intensifies on order books and gathers around 1.0650, 1.0670-80 and 1.0700, according to traders in Europe
Stops and stop entries were triggered below 1.2510 and 1.2500 in GBP/USD; support 55-DMA at 1.2434. EUR/GBP reclaimed 0.8500 handle, moving away from momentum stop entries below 0.8450
Aussie takes the lead from increased risk-on sentiment after better-than-estimate China inflation and improved Australian index of business conditions; AUD/USD rises to 0.7687, just nine pips shy of an eight-week high hit on Feb. 2. Iron ore on Dalian exchange hit a contract high
Loonie stays near 1.3000 pivotal level while crude oil trades comfortably above $53 handle; expiries totaling $1.3b rollover at 1.3050 and may anchor price action into New York cut-off
Some information comes from FX traders familiar with the transactions who asked not to be identified because they are not authorized to speak publicly