Markets:
- WTI crude up $2.03 to $84.15
- US 10-year yields up 7.5 bps to 1.784%
- S&P 500 up 4 points to 4662
- Gold down $6 to $1816
- JPY leads, AUD lags
The mood was poor early on and a dismal retail sales report threatened to worsen the situation but the headlines didn’t spark big moves, at least not initially. Eventually, the dollar rallied across the board, which is counter-intuitive to the data. Rising yields helped to fuel the move and about 3.8 rate hikes are now priced in for this year.
There wasn’t much shape to the FX market moves as it was a straight dollar bid since about 20 minutes after the retail sales report. US equities stumbled hard into the afternoon then bounced back late. The final move provided some relief to the dollar rally aside from in USD/JPY.
Elsewhere, the loonie got no help from the non-stop rally in oil. It was briefly negative after retail sales but steadied and is now within striking distance of the November highs. The loonie fared significantly better than its commodity cousins in a reflection of that but was still lower versus USD on the day.
Cable wraped up another strong week by halving its decline against the US dollar late in the day. There was decent selling into the London fix and just afterwards but that marked the bottom.
USD/JPY finished the day flat but it was a small win for the bulls as the pair fell as low as 113.50 before bouncing to 114.23 as yields rose strongly late. That’s where I’ll be watching in the week ahead as 10s threaten the recent highs and a potential re-ignition of the anxiety about rising borrowing costs.
Watch out for Chinese data on GDP, retail sales and industrial production shortly after the FX market re-opening.
Have a great weekend.