Yield-o-Mania Global yields ratcheted higher after a stronger than expected jump on Germany’s PPI which bolsters the hotter than expected comprehensive inflation narrative. But it was the jump in US 2-year note yields that provided the extra boost to the US dollar as shorter-dated tenors provides investors with better goalposts for determining how the market is viewing Fed sentiment However, the lukewarm demand for two-year notes at auction and with supply concerns expected to weigh heavy on investor bond appetite this week, we could see the dollar back under pressure. Of course, traders are erring on the side of caution ahead of the release of
Oil prices were mixed Tuesday, with the U.S. benchmark gaining ground on its global counterpart thanks to Canadian pipeline problems. West Texas Intermediate futures for April delivery CLJ8, +0.10% rose 53 cents, or 0.9%, to $62.08 a barrel. Brent crude LCOJ8, -0.84% the global benchmark, lost 8 cents, or 0.1%, to $65.59 a barrel. The move left the gap between Brent and WTI prices the narrowest in six months. The narrowing of the spread between the two benchmarks turns in large part on what’s occurring in Cushing, Okla., the Nymex delivery hub for WTI futures. Data from the Energy Information Administration released on Feb. 14
Senior Market Analyst Craig Erlam discusses this week’s key event risks, with the most notable being the UK jobs report and BoE inflation report hearing. Craig also gives his live analysis on EURUSD (11:04), GBPUSD (15:13), EURGBP (17:04), AUDUSD (18:36), USDCAD (20:02), GBPCAD (22:01), NZDUSD (24:47), USDJPY (25:44), GBPJPY (26:47) and EURJPY (28:24). USD/JPY – Dollar Punches Above 107 Yen, Fed Minutes Ahead Higher Yields Pushing Dollar Up Intermezzo
Tuesday February 20: Five-things the markets are talking about Overnight, global stock indexes have declined along with U.S futures, while the ‘big’ dollar has rallied a tad as U.S Treasury yields back up towards their four-year highs. No central bank meetings are scheduled for this week although minutes from the latest FOMC (Wed) and the ECB meetings (Thurs.) will be published. Note: Given the forthcoming March FOMC meeting (March 20 -21) when markets expect another +25 bps increase, dealers will be looking for signs that the majority of the committee is aligned for the increase. They also will be looking to see how the FOMC’s
Intermezzo It was a predictable snoozefest in FX overnight as global holiday sessions crimped activity. And adding to the void, there was scant data during European hours which severely nipped action as traders had few if any fundamental guideposts. But the markets interlude included the usual holiday- liquidity induced mystery move as the dollar went bid at the NY open. But the step was humble and little more than an attempt to trigger some stops in low liquidity market conditions. But all near-term support levels held and the move and quickly retracted as there was no news to support the quickstep sell-off. Chalk it up
The Japanese yen has posted slight losses in the Monday session. In North American trade, USD/JPY is trading at 106.54, up 0.23% on the day. On the release front, there are no US events, with US markets closed for Presidents’ Day. In Japan, the current account surplus jumped to JPY 0.37 trillion in January, up from JPY 0.09 trillion a month earlier. This easily beat the estimate of JPY 0.14 trillion. On Tuesday, Japan releases Manufacturing PMI and All Industries Activity. The US posted sharp housing and consumer confidence reports on Friday, but the dollar failed to make headway against the surging Japanese yen. Building
Higher US inflation fails to spark dollar revival The US dollar depreciated across the board versus major pairs despite consumer prices rising more than expected. Inflation anxiety had triggered a sell-off in global stock markets with the Fed expected to ramp up their interest rate hike path yet the dollar did not benefit as higher rates have already been priced in by the market. Fiscal uncertainty driven by political factors continue to confound investors with stock indices rebounding this week and the dollar hitting a 2014 low. The paradox in consumer spending and retail sales continues as Americans remain confident in the economic outlook yet
US Bond Auction TIPS the dollar A dismal US 30year TIPS auction is weighing on dollar demand as the sagging bid to cover ratio of 2.31 is signalling dwindling investor appetite as inflationary headwinds build. The dollar is lower because no one wants to own US bonds despite the higher yield, knowing the inflationary headwinds will push yields higher and bond prices lower The market remains nonplussed by the breakdown of FX /Interest rate correlations and while the debate still rages concerning Wednesday dollar sell-off. I think its time to throw textbook economics out the window as well as the so-called interest rate pivot point.
U.S. producer prices accelerated in January, boosted by strong gains in the cost of gasoline and healthcare, offering more evidence that inflation pressures were building up. The report came on the heels of data on Wednesday showing a broad increase in consumer prices in January. The Labor Department said on Thursday its producer price index for final demand rose 0.4 percent last month after being unchanged in December. In the 12 months through January, the PPI rose 2.7 percent after advancing 2.6 percent in December. A key gauge of underlying producer price pressures that excludes food, energy and trade services jumped 0.4 percent last month.
The number of Americans filing for unemployment benefits rebounded from a nearly 45-year low last week, but remained below a level that is associated with a tightening labor market. Initial claims for state unemployment benefits increased 7,000 to a seasonally adjusted 230,000 for the week ended Feb. 10, the Labor Department said on Thursday. Claims for the prior week were revised to show 2,000 more applications received than previously reported. Claims fell to 216,000 in mid-January, which was the lowest level since January 1973. Economists polled by Reuters had forecast claims rising to 230,000 in the latest week. Last week marked the 154th straight week