New Month, Same Story for USD

The US dollar finished on the lows in the first trading day of February despite strong manufacturing data and a jump in Treasury yields. The euro was the top performer while the Australian dollar lagged; Bitcoin was battered. Australian PPI is up next. 7 out of the 8 existing Premium trades are currently in the green. We will lock in gains in some of these trades ahead of Friday's US jobs report.

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Hopes that rising yields will give the US dollar a sustained lift are evaporating. The US 10-year yield jumped 7 bps to 2.78% but USD/JPY slipped to 109.30 from a high of 109.75. The euro is a handful of pips below the cycle high after a fresh push above 1.25.

The dollar got some good news on the data from with the ISM manufacturing index at 59.1 compared to 58.6 expected. Construction spending also beat at +0.7% versus +0.4% expected. On the flipside, auto sales were soft and so was productivity.

One thing we were watching closely was how the US dollar would perform after the turn of the calendar. There were plenty of reasons to think that end-of-the-month flows were at work and that's increasingly looking realistic. Even more disconcerting for USD bulls is that intraday swings in equity indices have little impact on USD.

Looking ahead, data will be the main focus of Australian dollar traders with the 0030 GMT PPI release. There is no consensus estimate but the prior was +0.2% q/q. Given that CPI was already reported, the effect is likely to be muted. One thing to note on AUD/USD is that the pair has risen in February in 14 of the past 16 years. This is easily the best month on the calendar for AUD.