USD weakness a flash in the pan

The main theme in the FX space was US dollar weakness as traders reacted to the violent moves in the bond market.

Source: Bloomberg

While the greenback lost significant ground to most of the major currencies, the move wasn’t quite as pronounced in GBP/USD. The pair managed to come off lows in the $1.5900 region and traded as high as $1.6070 before dropping back below $1.6000.

On the economic front, traders focused on UK jobs data, which showed some signs of strain and essentially confirmed a sense the recovery is stalling. The subdued performance in the sterling came despite calls from the Bank of England’s Martin Weale for a rate hike in anticipation of future increases in wage growth. This was quite interesting, considering wage growth remains flat.

The main theme today will be whether the USD can recover after the choppy performance yesterday. The $1.6000 level seems to be acting as a barrier in the near term and could encourage some short-term selling. Out of the US today, we have unemployment claims, industrial production and the Philly Fed manufacturing index due for release.

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