Global equities fluctuate
and the dollar gains as US ten-year treasury yields spike
John Schweizer |
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
“Now is the time to understand more, so that
we may fear less”
May 16, 2018
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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.
production data for April came out slightly above expectations at 1.7% for
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
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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