Dollar index posts significant gains

Friday, February 27, 2015

The dollar index posted significant gains yesterday rallying 1.14% as significant gains were made against most major peers as core inflation registered a bigger increase than expected. Despite the headline CPI figure slipping -0.7% m/m in January against expectations of a -0.6% decline, after stripping out the effects of food and energy inflation data showed a better than expected 0.2% rise in core CPI m/m against expectations of a 0.1% increase. The figure, which improved on the previous months revised reading of 0.1% m/m sent investors rushing into the greenback as investors reacted positively to the encouraging outlook, building on previous comments from Fed Chair Janet Yellen who struck a more hawkish tone than usual but offered additional clarity on an eventual rates rise. US benchmark equity indices ended the day in negative territory, pinned back by a stronger dollar.

Most major equity indices in Asia ended the week on a positive note, encouraged by the better than expected US core inflation data released yesterday. Japan’s Nikkei pushed tentatively higher as it added to the recent rally and pushed towards a fresh 15 year high while Chinese mainland stock indices rallied higher on a weaker Renminbi. The yuan lost further ground against the dollar, trading towards 6.2705 overnight as it reached its lowest level since October 2012, registering its biggest downward move against the dollar in just over four weeks as it lost 0.16%. The yen continued to find support above 119.00 overnight as it traded rangebound once again and with investors anticipating the second reading of US Q4 GDP data as well as the Chicago PMI and University of Michigan sentiment index we could see further gains in the dollar against JPY and CNY on any positive surprises.

Front month Brent futures held above $60/bbl yesterday as fresh supply outages in the North Sea and gas supply concerns in Europe supported the global benchmark above this psychological level of support. Brent futures rallied towards $62.63/bbl at one stage, however, gains towards this level were unable to take root and futures slid 2.9% lower. Prices have gained over 25% since the start of the month and were up 30% from the start of the month at one point last week as a reduction in rig counts and hopes for improving oil demand supported near term futures. Activity this morning has seen front month Brent contracts open above yesterday’s close, finding firm support towards $60.50/bbl early on before extending gains a dollar higher, touching $61.50/bbl towards the European open and investors will be paying close attention to today’s macro data releases for further support.       

DXY posts solid gains against major peers yesterday

DXY Curncy DOLLAR INDEX SPOT 2015 02 27 07 29 32

CNY weakens to levels last seen in October 2012

CNY Curncy China Renminbi Spot 2015 02 27 07 46 23

Events for today

0001

UK

Feb

GfK Consumer Confidence

1330

US

Q4

GDP Price index & Pers. consumption

1445

US

Feb

Chicago PMI

1500

US

Jan

Pending Home Sales

1500

US

Feb

Michigan Survey

OE: 

Mar  Sugar (NYBOT)

All times UK Local Time

 

Topics: GDP, JPY, CNY, DXY, CPI
More from: Kash Kamal