Forex today: dollar ends the month on the back foot, markets less positive on outlooks

Forex today was another bad one for the US dollar, ending the month with a total return for the year to date of -5.6% in the DXY.

Despite a drop in oil, the DXY fell below the 97 handle as investors speculate that inflation targets may not be achieved by Central Banks due to a breakdown of energy prices.  Fed's Kaplan also voiced concerns over 'uneven' recent inflation although still backed gradual, patient policy tightening and was supporting two more rate hikes this year. CNN reported that Comey we say that Trump pressured him on Flynn investigation adding risk from the political front. 

A run of poor data was also pressuring the dollar:

• US MBA Mortgage application -3.4%, 4.4% -prev 
• US Pending sales change MM -1.3% vs 0.5% RTRS f/c, -0.9% -prev
• US Redbook YY 1.8%, 2.0% -prev 
• US Chicago PMI 59.4 v 57.0 RTRS f/c, 58.3 -prev 
• Fed Beige Book: few signs of inflation pressures

As far as other currencies were concerned, the general market tone was negative and G7's were defensive overall. However, the pound made an impressive come back to the 1.29 handle after recent polls were unfavourable to the Conservatives and sent shockwaves across sterling crosses in early Asia yesterday. The euro fell just shy of the May high. CAD was on the backfoot with WTI tanking and the yen was firm once again in risk-off markets. Thr antipodeans were pressured due to the price of oil weighing on the commodity bloc - iron ore dropped by 3%.

Closing prices

• DXY:  97.014   -0.27% (96.858 - 97.495)
• CHF 0.9688  - 0.60% (0.9670 - 0.9761)
• EUR: 1.1231 + 0.40% (1.1165 - 1.1252)
• GBP:  1.2882 + 0.18% (1.2769 - 1.2921)
• Cross: 0.87194 +  0.23% (0.86974 - 0.87486)
• USD/JPY:  110.75  -0.09% (110.49 - 111.23)
• EUR/JPY:  124.44 -0.36%  (123.73 - 124.53)
• USDCAD: 1.3507 +0.36% (1.3437 - 1.3523)
• AUD/USD: 0.7430 -0.47% ( 0.7425 - 0.7476)
• NZD/USD: 0.7088 -0.10% (0.7082 - 0.7122)
• Gold 1,270.16USD +0.56% (1,259.68 - 1,274.17)
• US10YR:   2.2063USD -0.16% (2.1941 - 2.2307)

The day ahead in Asia

Analysts at Westpac offer the key event risks ahead:

"Australia: Apr retail sales is expected by WBC to rise 0.3% – a fairly muted rebound from low readings in Feb and Mar (weather related). Consumer sentiment has weakened amid increased pressures on family finances, and business surveys report an underperforming retail sector. Q1 private capex is forecasted by WBC to rise by 0.5% after four years of annual contraction - 2016 fell 15.5%. The mining investment drag has diminished and some businesses appear to be responding modestly to improved conditions. WBC views a ‘neutral’ result for est. 2 capex plans 2017/2018 as $86bn (7% upgrade on est 1). May Corelogic home-value index is expected by WBC to fall 1.0% - the first monthly drop since Nov 2015 – led by Sydney and Melbourne.

US: May ADP employment is expected to rise 180k, which would give indications of a solid outcome for Friday’s payrolls. May ISM manufacturing has held well above average expansion levels, last at 54.8 in Apr. However, this arguably reflects sentiment as much as activity, though manufacturing production did recently jump in Apr. Fedspeak includes Williams at the Bank of Korea conference."

Key notes from US shift

• Canada: Real GDP increased 0.5% in March, following no change in February 
• Fed's Kaplan: Crackdown on undocumented immigrants could hit consumer spending, GDP Growth - RTRS 
• ECB's Lautenschläger: Domestic price pressures are still subdued; the same is true for wages
• US stocks turn sharply lower after dismal US data
• WTI tumbles to lows near $47.80, API eyed
• US Press. Trump: I will be announcing my decision on the Paris Accord over the next few days
• UK election: Conservatives stretch lead over Labour
• US Pending Home Sales: April shows another drop - Wells Fargo
• US: Treasury yields fall on last day of month
• SurveyMonkey Poll: UK Conservatives 44% vs. Labour Party 38%
• Fed Beige Book: Majority of districts said firms expressed positive near-term outlook
• Gold jumps to $1274 1-month high