A post-U.S. payrolls rebound in the dollar and Treasury yields kept driving thin markets on Monday before a speech by Federal Reserve Chair Janet Yellen that follows hawkish comments from Fed Vice-Chairman William Dudley.
Yellen will speak at the University of Michigan Ford School of Public Policy and will take questions from the audience and Twitter. Investors will look for further forward guidance after Dudley downplayed the length of any pause in short-term rate normalization after the Fed starts shrinking its balance sheet. The Bloomberg Dollar Spot Index rose a third day, up as much as 0.2 percent amid modest flows, according to foreign-exchange traders across Europe.
This week’s Easter holidays have already begun weighing on volumes and it might be one of the main reasons why the pound and the euro haven’t seen deeper losses so far, despite ongoing interest by a mix of names to add shorts, the traders add. Leveraged names have become dollar-dip buyers across the board, said the traders who asked not to be identified as they weren’t authorized to speak publicly.
The two-week tenor in options structures now captures the first round of France elections and its intraday surge in euro-yen demonstrated that concerns over tail risks remained strong. The euro pared losses versus the greenback and was little changed at 1.0580. Selling pressure came through options and spot offers alike, extending all way to 1.0650, the traders noted.
The pound led gains over G-10 bloc as it rose as much as 0.3% to 1.2406; leveraged and interbank accounts faded the rally and look to add more every 20-25 pips: traders
USD/JPY pared gains of 0.4% to climb 0.3% to 111.37; stops above 111.50 barrier were triggered, leaving the market short gamma on the upside, a trader notes, with more offers seen near 112.00 handle
The Aussie led losses, down by 0.3% to 0.7476 low, a level unseen since Jan. 17
A large spike in Swiss futures might have been the result of a fat-finger: trader; EUR/CHF slightly lower at 1.0684, within a 12-pip range