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US Data Weighs On Greenback, Swiss Franc Surges

FOREX
  • Early weakness in equities underpinned a firmer USD in early trade on Tuesday, extending on Monday’s more buoyant price action. However, lower than expected US data and potential flows relating to month-end prompted a reversal for the greenback, with the USD Index trading close to unchanged for the week approaching the Fed’s February decision tomorrow.
  • US Employment Cost Index data confirmed that AHE wage growth moderated in Q4, sparking a quick gap lower from which the US dollar was unable to recover from.
  • Topping the G10 leaderboard is the Swiss Franc, which has advanced close to 1% against both the Euro and the dollar. The move lower in USDCHF follows three straight days of gains, the entirety of which have been erased today. The pair has significantly narrowed the gap with the trend lows and key support around the 0.91 handle. There appears nothing notable driving the CHF bid, with potential month-end dynamics contributing to the outperformance.
  • The Norwegian Krone is one of the poorest performers in G10, as the Norges Bank confirmed a larger than expected schedule for February FX purchases. Consensus looked for an unchanged clip of NOK 1.5lbn per day, not the NOK 1.9bln confirmed this morning. EUR/NOK rallied to new cycle highs in response, trading as high as 10.9276 in early US trade before moderating.
  • GBP has also traded on the weaker side, with cable unable to bounce amid the broad dollar weakness. EURGBP (+0.37%) has maintained a bid tone throughout the session and further gains would expose resistance at 0.8897, the Jan 13 high and a bull trigger. Clearance of this hurdle would confirm a resumption of the bull cycle that started early December last year.
  • US ADP, ISM Manufacturing PMI and JOLTS data all play second fiddle to the FOMC decision where the Fed will downshift its rate hike pace in February for the second consecutive meeting, to 25bp from 50bp. All eyes will then be on Chair Powell’s press conference.
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