Dollar Pares Loss in Choppy Session; Data Whisper Traps Bearsby
Fast price swings, thin liquidity before long weekend
Retail sales miss offset by upward revision to prior month
The dollar swung between gains and losses to trade down ~0.2% as measured by the Bloomberg dollar index in a roller-coaster ride at the end of the week amid moderate trading flows and sparse liquidity that allowed for some sharp price swings as traders trimmed positions before a long weekend in the U.S.
The dollar, which remains lower against most of its G-10 peers, fell to a fresh low for the day ahead of data that showed December retail sales rose 0.6% m/m vs estimates for a gain of 0.7%. The shortfall was offset by an upward revision of a tenth of a percent to November’s data, putting the overall outcome above a “whisper” number for a considerably weaker report, thereby fueling an intraday short squeeze that was felt strongest in dollar-yen and in Treasury yields.
- USD/JPY trading ~114.71; the pair rebounded quickly to 115.45 after the data, reversing a drop to 114.19 that may have left some USD shorts stranded, a trader in New York said; the rise in dollar-yen tracked a sharp uptick in the UST yield which left traders in both markets pointing to the other as the leader of the price action
- USD gains were briefly underpinned as U.S. stocks rose to the high before shedding gains
- EUR/USD rebounded to ~1.0639 after dropping to a fresh low at 1.0596 around mid-morning as traders tested the resolve of buyers shortly after large options at 1.0600 expired
- Early in the day, EUR rose to a fresh high at 1.0673 before offers layered ahead of 1.0700 capped gains for a second day
- GBP pared an early drop to trade near 1.2200 ahead of the U.K. close; GBP remains choppy on Brexit concerns ahead of a speech by U.K. PM May on Tuesday