It’s a quiet day for data, save for existing home sales in the US, which shrank more than expected in February. At a seasonally adjusted annual rate of 5.48 million, February’s reading was the lowest print in the last 5 months; a stark contrast to January’s 5.69 million which marked a 10-year high. The contraction was driven by a 9.2% decline in condo sales and a 3% drop in single family homes.
A strong risk-off sentiment has fueled a rising yen through the morning, and while existing home sales might not be a top-tier economic indicator, it was the straw that broke the camel’s back pushing USD/JPY below 111.0. A ¥813.4 billion yen trade surplus in Japan confirms that January’s unexpected trade deficit was indeed a temporary blip. Demand from China, which lagged in January due to observance of the lunar New Year, made a strong recovery in February. Driven by sales in China, exports jumped 11.3%; the biggest gain since January 2015.
CAD is trading lower with oil prices and risk sentiment. Oil prices are flirting with 4-month lows after the Energy Information Administration (EIA)’s weekly report on crude oil inventories in the US came in higher than analysts expected – over 2 million barrels higher. After a 0.237 million drop the week prior, markets were looking for a 2.8m rise vs. the 4.954m they got. This further undermines OPEC’s attempts to support oil prices as US producers have responded to production cuts abroad with increased production at home. Should we not see these oil stockpiles begin to recede, the pressure for further cuts will only grow.
On the calendar tomorrow, we’re eyeing UK retail sales, preliminary consumer confidence from the euro area, US initial jobless claims, and a speech by Fed Chair Janet Yellen. Outside the economic space, the legislation to repeal Obamacare faces a vote in the House on Thursday. Republicans need 216 votes to push through to the senate, but the latest estimates remain unclear on whether they will pass this hurdle. If the legislation can clear the House this could support the view that Trump’s administration will have an easier time pushing through other measures, such as infrastructure spending and tax cuts, which would support a stronger dollar, but investors have been more skeptical as of late on whether these will come to fruition.
EURUSD: Euro continues to find upward pressure as the USD remains weak.
GBPUSD: Sterling weaker, pushing lower after headline reports of a shooting outside of Parliament.
AUDUSD: Aussie dollar flat after a mixed morning as domestic drivers take a back seat.
USDCAD: Canadian dollar lower as weak oil prices weigh on the loonie; however, we see limited upside on USDCAD as the greenback sees broader pressures.
USDJPY: The yen is the clear victor among major currencies today. Supported by risk-off trades, USDJPY has pushed below 111.