Forex today: Fed's Evans advocated for further rates cuts, Dollar back and forth

• Dollar was good two-way business on mixed feelings over trade risk.
• Chicago Fed President Evans who is a dove advocated for further rates cuts.

Forex today was slightly less risk-averse, although the central bank theme came to the surface in European and US markets following yesterday's surprise 50 basis point cut for the Reserve Bank of New Zealand. Indeed, trade wars remained the main topic wit much of the market dismissing the likelihood of a resolution anytime soon which made for plenty of turbulence once again, albeit to a slightly lesser degree with respect to percentage-based moves in the FX space.

Chicago Fed President Evans who is a dove advocated for further rates cuts, saying the recent trade war tensions following the Fed’s last meeting present fresh headwinds to the economy. President Trump tweeted that the Fed “must Cut Rates bigger and faster, and stop their ridiculous quantitative tightening NOW.”

The Dollar was making a round trip, between 97.30 and through 97.70, starting out on the backfoot in European markets but finding demand in New York trade, rallying to a high of 97.65. US yields found traction with the US Treasury yields reduced their earlier decline on Wednesday following soft demand for $27 billion in 10-year notes, which was the second leg of this week's $84 billion in quarterly refunding - The 10-yarr yield went from a three-year low of 1.59% to 1.73%. Markets are pricing 34bp of easing at the 19 September Fed meeting, and a terminal rate of 1.01% (Fed funds rate currently 2.13%).

Currency action

Analysts at Westpac broke down the currency action from overnight.

• EUR/USD seesawed in line with US yields, finishing flat on the day around 1.1200.

• GBP/USD chopped slightly lower, to 1.2140. USD/JPY fell as far as 105.50 as US yields bottomed, then recovered to 106.20, down only -0.3% on the day.

• AUD/USD retraced most of yesterday’s RBNZ-led plunge, rising from 0.6677 (the lowest level since March 2009) to 0.6760 (and 0.6780 pre-RBNZ).

• Underperformer NZD rose from 0.6378 (lowest since Jan 2016) to 0.6445, still well below the 0.6550 level trading just prior to the RBNZ’s surprising 50bp cut yesterday.

• AUD/NZD preserved yesterday’s gains, up about 1.3% to 1.0490.

Key notes from Wall Street:

• Wall Street ekes out a small gain, albeit, Dow ends in the red again

Key events ahead:

"China’s July trade report is expected to show a pullback in the surplus from June’s hefty $51bn, to around $43bn. Exports are seen down about -1%yr in US$ terms, imports -9%yr but as always there is plenty of scope for surprise in this volatile survey."