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Yen, Swiss Franc Slump; Aussie, Kiwi Up, Asians Dip
Summary: The benchmark US 10-year Treasury yield soared 5 basis points to 1.50% ahead of this week’s (early Thursday Sydney) Federal Reserve monetary policy announcement. The Dollar, however, closed mixed against its rivals even as US bond yields rose. Markets yesterday saw a delayed reaction to Thursday’s large US CPI increase (the Core number was the biggest in more than 10 years), the Dollar soared over the weekend. The Dollar Index (USD/DXY), a favoured gauge of the Greenback’s value against a basket of 5 major currencies, rallied 0.50% to 90.50 over the weekend. Overnight, USD/DXY ended flat at 90.50. Trading conditions were thin in Asia on Monday due to bank holidays in Australia (Queen’s Birthday) and China (Dragon Boat Festival). Against the Japanese Yen, the Dollar broke through 110.00 finishing up 0.47% at 110.07 (109.60 Friday). The USD/CHF soared to an overnight high at 0.90014 before easing to settle at 0.8995, (0.8975 yesterday) up 0.4%. The Euro finished little changed at 1.2118 (1.2113). Sterling settled at 1.4106 (1.4112 Monday). Traditional high yielder, the Australian Dollar was up 0.19% to 0.7712 (0.7702) while the Kiwi (NZD/USD) edged up to 0.7142 from 0.7127. USD/CAD nudged lower to 1.2145 from 1.2157. Against China’s Offshore Yuan, the Greenback (USD/CNH) broke through the 6.4 barrier to end higher at 6.4065 (6.3965 yesterday). Wall Street stocks were mixed. The DOW lost 0.25% to 34,375 (34,460). The S&P 500 edged up to 4,255 (4,245). Global bond yields were mostly higher. Germany’s 10-year Bund yield rose 2 basis points to -0.25%. Japan’s 10-year JGB yield finished at 0.03% from 0.02%.
On the Lookout: Today kicks off a busy week which see a data dump and central bank policy meetings from the US Federal Reserve, Swiss National Bank and Bank of Japan. Today the RBA releases the minutes of its latest meeting (18 May). Europe kicks off with German and French Final Inflation reports (May). The Eurozone Trade Balance for April is also released. The UK follows with its May Employment report. UK Claimant Count Change (the number of people claiming unemployment benefits during the previous month) is forecast to rise to +25,000 from a previous -15,100 (Forex Factory). UK Wages (Average Earnings Index) which include bonuses are expected to climb in April to 4.9% from 4% previously (Finlogix). Britain’s Unemployment Rate is forecast to have dipped to 4.7% in April from March’s 4.8%. US Headline (f/c at -0.8% from 0.0& m/m and 4.8% from 4.1% y/y) and Core (excluding automobiles) Retail Sales (f/c 0.4% from -0.8% m/m) for May follow. US May Headline (f/c 0.6% from 0.6% m/m) and Core PPI (f/c 0.7% from 0.6% m/m) follow. The US also releases its May Industrial Production (f/c 0.6% from 0.7%), Capacity Utilisation (f/c 75% from 74.9%). US NAHB Housing Market Index (June – f/c 83.0 from 83.0) and Business Inventories (April m/m) (f/c -0.1% from +0.3%) round up today’s data dump. (All forecasts c/o ACY’s Finlogix). The week ahead also sees the release of UK and Canadian CPI, Australian Employment, and US Philly Fed Manufacturing Index. A huge data dump week indeed.
Trading Perspective: Overnight the Dollar finished mixed despite higher US bond yields ahead of the Fed’s monetary policy decision later this week. The Greenback however held most of its gains made over the weekend on the delayed reaction to last week’s red-hot US inflation data. The rebound in the benchmark US 10-year bond yield to 1.50% from 1.45%. Global rival treasury yields were also up but to a lesser extent. The yield gap is widening in favour of the US Dollar and should this continue, we could see further Greenback strength. Much would depend on the outcome of today’s key US Retail Sales, PPI, and Industrial Production reports. Which all play into Thursday’s Federal Reserve Monetary Policy Meeting, FOMC Statement and Press Conference. Watch those US bond yields this week.
Have a good trading week ahead all, happy Tuesday.
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