Weak US economic data this morning added to the bearish sentiment driving investors into US Treasuries. The US 10yr Treasury peaked yesterday at 3.00% and is currently trading at 2.77%. At the same time, the US dollar weakened overnight and this morning as investors question both US economic growth and therefore the Fed’s future path for interest rates.
“Nothing is like it seems, but everything is exactly like it is.”
May 19, 2022
EUR/USD 1.0570 GBP/USD 1.2509 USD/CAD 1.2789 AUD/USD 0.7066 USD/JPY 127.29 USD/CNH 6.7211 USD/ILS 3.3781 USD/MXN 19.9196 USD/CHF 0.9716 USD/INR 77.7263 USD/BRL 4.9165 USD/SGD 1.3806 USD/DKK 7.0415 USD/SEK 9.9271 USD/NOK 9.7144
The dollar was weaker overnight and extended losses after the morning’s economic releases. Weekly Initial Jobless claims came in at 218K which is above the 200K expected with prior week revised down to 197. The Philly Fed Business Outlook Index for May came in at 2.6, much less than the estimates of 15 and April's 17.6.GBP
GBP/USD rallied off a two-year low earlier in the week and is now trading over 1.24. Chancellor of the Exchequer, Rishi Sunak, has promised tax cuts for businesses ahead of a sharp increase in headline co-operation tax. He also warned that stimulus to ease the cost-of-living crisis could stoke inflation further.EUR
The euro gained on overall US dollar weakness. ECB minutes from the April meeting revealed little. France's Macron and his allies are projected to retain a majority in next month’s legislative elections. Brussels has warned the UK they must engage with the EU over Northern Ireland, having previously threatened the suspension of the trade agreement should the UK take unilateral action.CAD
The Canadian dollar is flat this morning. Overall US dollar bearishness was offset by a weaker and very volatile oil price. Oil traded over $115/bbl yesterday before the equity sell-off picked up steam over the afternoon. Oil price is about $106/bbl as we write. Oil price was also weakened by news China may buy oil from Russia adding to the overall global supply.ASIA/PACIFIC
Most currencies in Asia gain on overall US dollar weakness. The Japanese yen gained for a second day despite Japan’s trade deficit widening to $6.6 billion dollars in April, as a weaker yen drove up the cost of imports.
Asian stocks extended a sell-off on fears of an economic downturn, with investors turning to bonds.
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