Forexlive Americas FX news wrap: US consumer holds up. USD initially slumps on Fed minutes

Markets:

• Gold down $12 to $1763
• WTI crude oil up $1.19 to $87.72
• US 10-year yields up 6.7 bps to 2.89%
• S&P 500 down 28 points to 4279
• EUR leads, AUD lags

USD/JPY was strong early in Europe and then pushed even higher after retail sales, touching 135.49. The top came as risk appetite improved but it couldn’t get through offers at 135.50. The Fed minutes weren’t overtly dovish but many traders were looking for the Fed to salt in some hawkish warnings and there weren’t any so that was seen as dovish and USD/JPY fell to 134.82 before bouncing 20 pips.

Adding to the dollar bid was a selloff in bonds that was underscored by a terrible 20-year auction. Retail sales didn’t have much of a hand in that but underscored that the US consumer is in (at least) decent shape.

US 2-year yields pushing higher were the early story as they touched 3.37%, which was the highest since the June post-CPI spike high. But it was reeled back to 3.27% after the Minutes and with Fed fund futures pushing up the odds of just a 50 bps hike in Sept. That’s up to 63% from 40% a day ago.

The euro showed some mettle today after some recent disappointing performances. TTF prices rose another 3% so that wasn’t a help but sellers were reluctant to test the bottom of the 1.01 to 1.03 range and that gave the pair some life, along with some frighteningly-high inflation forecasts from the UK. A mysterious bid starting at 10 am in NY suggested flows were part of the equation, even if that 30-pip move faded.

For its part, the pound got less of boost from talk of 13% inflation. It touched 1.2140 in Asia but ended up finshing 100 pips lower. Even the post-Minutes dollar selling offered little support.

NZD was the focus early after the RBNZ hike. The moves were seen as hawkish but both NZD and AUD were the laggards. There’s not a really strong explanation for that but the risk mood was negative and the bears won today’s fight.