Dollar and bond yields higher on high US inflation

Dollar and bond yields higher on high US inflation

US inflation for June released this morning was higher than expected, leading to a stronger US dollar and higher US Treasury yields. CPI MoM of 0.9% was higher than 0.5% expected and 0.6% for May, and CPI YoY of 5.4% was higher than 4.9% expected and 5.0% for May. CPI Ex-Food and Energy similarly exceeded expectations. Following the data, the US dollar index rose by 0.3% and US 10-yr Treasuries rose 2 bps, 1.35% to 1.37%. Earlier, Q2 earnings for JP Morgan and Goldman Sachs were mixed, lower trading revenues offset by deal making fees. The S&P 500 opened slightly lower.

“Tell me and I’ll forget; show me and I may remember; involve me and I’ll understand.”
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  • FX Rates
    July 13, 2021

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  • USD

    The unexpectedly higher US inflation data pushed the USD dollar higher, mostly against the Norwegian krone (+0.80%) and least against the Japanese yen (+0.05%). US Treasury yields rose --higher in the 2Yr and 5Yr maturities than the 10Yr and 30Yr – effectively flattening the yield curve. The S&P 500 opening lower by 13 pts at 4363. Traders await tomorrow’s PPI data and Fed Chair Powell’s testimony to Congress.


    The UK pound is lower by 0.50% following the higher-than-expected US inflation data. The Bank of England announced earlier this morning that Britain’s biggest banks will be permitted to increase dividend payouts to shareholders, stating that the banking industry has enough strength/capital to resume such payouts. The decision by the BOE is less cautious than the decision by the ECB to continue to restrict banks from making “excessive dividend” payouts to shareholders.


    The euro fell 0.25% versus the dollar following US inflation data, but it was already lower on the day after the European Central Bank said it would move to prevent banks from paying excessive dividends later this year when a cap on such payouts is removed. Traders interpret the move as an attempt by the ECB to force lenders to remain “cautious” as the economy struggles to recover from the pandemic.


    The Canadian dollar is lower by 0.5%, in line with the broadly stronger US dollar. Commodity prices are basically unchanged overnight, oil is stuck at $74 per barrel.


    Asian currencies performed better than most against the strong dollar, the Japanese yen and Chinese yuan basically flat. China releases GDP, Retail Sales and Industrial Production data tomorrow.

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Scott Petruska
Scott Petruska

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