Market wrap: GBP/USD outperformed, USD/JPY in focus - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"USD/JPY remained in focus, after Japanese finance minister Taro Aso told parliament that the yen’s recent rise wasn’t worrying enough to warrant intervention. The pair fell for a fourth straight day, to 106.18 – a 15-month low – before consolidating. It found a little support from news reports that an academic who supports aggressive monetary easing could join the Bank of Japan (Waseda University professor Masazumi Wakatabe). The Swiss franc also posted a gain of about 0.6% but clearly risk aversion was not the driver.

EUR/USD rose from 1.2450 to 1.2500 while GBP/USD outperformed, up 0.6% to 1.4085. No particular news seemed to be in play. AUD/USD was flat overall at 0.7930 but traded a fairly wide range of 0.7892-0.7967. NZD squeezed higher in late NY to be an outperformer on the day, probing above 0.7400. Thus AUD/NZD slipped to a fresh six-month low of 1.0705.

US 10yr treasury yields initially rose to 2.94% - the highest since Jan 2014 – but retraced in NY to 2.89%. 2yr yields similarly retraced from 2.20% -  a 10 year high. Fed fund futures yields continued to price the chance another rate hike in March as effectively a done deal but are torn between pricing 2 or 3 rate rises in 2018.

The US data calendar was busy but not influential for markets. Producer prices rose 0.4% m/m in Jan for an annual pace of 2.7%. Industrial production fell 0.1% in Jan (vs +0.2% expected), with downward revisions combining for a weak report in the wake of a strong Q4. Philadelphia Fed business survey rose from 22.2 in Jan to 25.8 while NY manufacturing (Empire State) fell from 17.7 in Jan to 13.1 in Feb. Homebuilder sentiment (NAHB) remained at 72, close to highs since 1999."