US DOLLAR, FED, YIELDS, RETAIL SALES, JOBLESS CLAIMS – TALKING POINTS:US Greenback enjoying protection as 2021 Treasury bond yield rally struggles
US DOLLAR, FED, YIELDS, RETAIL SALES, JOBLESS CLAIMS – TALKING POINTS:
- US Greenback enjoying protection as 2021 Treasury bond yield rally struggles
- Dovish feedback from Fed officers might have cooled tightening bets
- Incoming US retail gross sales, jobless claims information might supply USD a lifeline
Really helpful by Ilya Spivak
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The US Greenback is again on the defensive as Asia Pacific commerce transitions into European hours. The forex is being pushed decrease alongside benchmark 10-year US Treasury bond yields whereas gold and bellwether S&P 500 futures – a proxy for market-wide threat urge for food – observe increased.
Taken collectively, this appears to recommend that worries about sooner-than-expected Fed tightening are receding. Markets have been more and more involved about diminishing scope for stimulus in current weeks as fiscal stimulus and spreading vaccination fueled reflation bets.
The sense of urgency appears to have ebbed considerably as Treasury yields paused what had been a brisk rally because the begin of the 12 months within the first two weeks of April. Breakeven price measures of 2-5 12 months inflation expectations implied in bond markets stalled in tandem.
Serving to to calm the waters at the moment appeared to be a gradual stream of feedback from key Fed officers. Chair Powell, Vice Chair Clarida and influential New York Fed President Williams all struck a dovish tone, signaling that the withdrawal of coverage help is nowhere on the near-term horizon.
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On steadiness, that is nothing new. The markets’ speculative push for increased yields and a stronger Dollar got here towards the backdrop of analogous Fed rhetoric in March, with merchants seemingly betting that the ever-cautious financial authority will change its tune as soon as its inflation mandate is underneath strain.
To that finish, incoming financial information might alter baseline considering but once more. Eye-catching enhancements are anticipated on the March editions of US retail gross sales and industrial manufacturing figures, and the jobless claims report is seen displaying the smallest rise in three weeks.
US financial information has perked up relative to baseline forecasts lately, based on information from Citigroup. Extra of the identical – coupled with the promise of future outperformance due to an expansionary fiscal tailwind – might breathe new life into the reflation narrative.
On this state of affairs, USD might discover legs for a rebound towards most of its main counterparts. The anti-risk Japanese Yen might also fare comparatively properly if tightening fears weigh on broader sentiment. Currencies with few prospects for follow-on tightening, just like the Euro, could also be most weak.
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— Written by Ilya Spivak, Head Strategist, APAC at DailyFX.com
To contact Ilya, use the feedback part beneath or @IlyaSpivak on Twitter
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