Forex today: dollar bid on Powell's warnings, Iran deal gets axed by Trump

Forex today was choppy as markets rake head of Powell's warnings over an economic fallout if markets and corporations are not prepared for higher rates. Besides the dollar and the Central Bank theme, the reflation trade continued to be unwound and geopolitics took centre stage once again.

Trump axed the Iran nuclear deal at a time when we are approaching the N.Korea summit and while trade concerns continue to simmer away in the background between the US and China. The Europeans were not comfortable with Trumps action and voiced their concerns 

"These sanctions will target its energy, petrochemical and financial sectors. Those doing business in Iran will be provided a period of time to wind down operations in or business involving Iran – failure to do so will risk sanctions. The end result for markets was the USD continued to strengthen, US treasury yields pushed 1-2bps higher (both aided by positive data prints too), but US equities indices fell 0.3%," explained analysts at ANZ.

The US 10yr treasury yield climbed from 2.95% to 2.98% while the 2yr yields climbed from 2.50% to 2.51%. Fed fund futures yields continued to predict 2 rate hikes by year-end.

The single currency was seeing a paring of short dollar positions and sent the euro down to as low as 1.1839 in NY after a break of the 1.1890 support in the European morning. NY opened at 1.1875 and the pressures mounted. The pair fell through key levels on a firm dollar and US yields. However, the losses were eroded quickly and 1.1890 was traded again. There was a close of 1.1860.

Sterling was ending the NY session around 1.3545 and down -0.1% within a range of between 1.3560 and 1.3485, (down from the London high of 1.3593 M&A news). The UK data was a disappointment once again with the Halifax house price missing, (revealing a steep drop in UK house price, down 3.1% vs March and vs -0.2% expected) weighing on the pound early doors in NY. As for the cross, EUR/GBP ended the US session at 0.8760 down -0.4%, within Wednesday range of between 0.8810-0.8759. All eyes are on the BoE where no change is expected, giving a lead-in for the euro bulls. First up, UK retail sales.

USD/JPY was on the backfoot leading into the Iran announcements by Trump in the mid-afternoon of the US session. However, the pair was robust on the 109 handle until a dip into the 108.80's amid haven flows. The daily Tenkan at 109.35 caps any upside while focus stays on the 100-D SMA to protect against a bearish run.

As for the antipodeans, the Aussie started dut the NY session on the backfoot with pressures from European trade sending it down to open at 0.7460. The bears kept control and send the Aussie to a new trend low below 0.7435. There was a bullish attempt but this was faded and the pair ended the US session around 0.7450. The Kiwi fell from 0.7030 to 0.6954 to mark the lowest since December 2017.

Key notes from US shift: 

Fundawrap: US heads to N.Korea, Trump pulls US out of Iran 'nuclear deal'

Key notes for Asia:

"Australia’s focus will be the post-Budget spin, with no data of note due. During Sydney trade we will see results of primary elections in several US states, selecting candidates for November's vital mid-term elections," analysts at Westpac explained.