FX Update

Global equities fluctuate and the dollar gains as US ten-year treasury yields spike

 |  May 16, 2018

The US Dollar index struck a 2018 high, over 93.57 +0.38%, as interest rate differentials supported the big buck. The US 10-year yield rallied above 3.08% driving initial support but momentum has tapered as safe haven Japanese yen and Swiss franc also made gains as concerns over N. Korea potentially pulling out of next month’s summit heightened geopolitical concerns.

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  • FX Rates
    May 16, 2018

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.


  • USD

    US ten-year treasury yields reached 3.09%, its highest level since 2011, spurring the greenback to a year to date high. Firm retail sales data yesterday has helped bolster the case for additional rate hikes this year. US Housing Starts and Building Permits for April slipped -3.7% and -1.8% respectively, a trend which may pose future growth concerns.

    US industrial production data for April came out slightly above expectations at 1.7% for April.


    The pound dipped lower, below 1.35, in the absence of any UK market data and as the USD garnered all attention supported by higher interest rates.

    Theresa May is expected to publish a detailed plan for the UK’s post-Brexit relationship with the EU next month, setting a deadline for her Cabinet to agree on a common stance. The House of Lords is expected to deal another setback to the prime minister’s Brexit bill today with an amendment to maintain EU environmental standards.


    The euro slipped as German GDP data came out slightly below expectations yesterday while EU GDP was in line with forecasts at 2.5% YoY. Today’s CPI data for the Eurozone, released as expected at 1.2% YoY did not provide support. Concern is mounting the Eurozone’s recovery has peaked instilling a weak euro sentiment.


    The euro also came under pressure on news Italy’s 5 Star Movement and the right leaning League plan to request debt forgiveness from the ECB pushing Italian stocks and bonds lower.


    Despite crude oil prices coming off its peak and a broadly strong US dollar, the loonie is gaining momentum on better than expected manufacturing sales data, up 1.4% vs. expectations of 0.9% for March. The probability of a BOC rate hike at the May 30th meeting ticked slightly upwards to 37%. Policymakers will have a watchful eye Canadian April CPI numbers to be released Friday. 


    The yen rallied on safe haven interest as news that North Korea will walk away from its summit with the US next month if Trump insists on a “one-sided demand” for denuclearization bolster risk concerns. The JPY also gain a bit of upside as Industrial Production for March beat expectations rising to 2.4% on an annualized basis.

    Stocks in the region recovered slightly but were unable to leave negative territory, Australia’s ASX 200 was the only major index to post a gain.

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Source: Bloomberg 2017

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About the Author

John Schweizer is a product and foreign exchange advisor with Silicon Valley Bank’s Global Financial Services Group, based in Boston, MA. He works with SVB clients who conduct business globally and advises on the products, strategies and solutions used to manage international transactions and cash flows and mitigate the risk associated with currency fluctuations.

John has over 25 years of financial services experience in global treasury and foreign exchange, encompassing trading, sales and marketing, and product advisory. Prior to joining Silicon Valley Bank, he worked at several financial institutions including BankBoston, TD Bank and Fidelity Investments.

John holds a B.A. in International Affairs from The George Washington University and a M.S. in Multinational Commerce from Boston University.
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