US 2-Yr Treasury yields moved above 1% and 10-Yr yields above 1.80%, levels not seen since before the pandemic. US equities are opening lower, as investors rotate from interest rate sensitive growth and tech stocks to value and European shares. Oil jumped to $85 a barrel, its highest level in seven years. The US dollar is higher on the back of the higher yields and a rebound following last week’s big dollar sell-off. Traders prepare for a week full of economic data.
Economic data and events:
Tuesday: Bank of Japan policy meeting, US Housing Market Index, Empire State Manufacturing Survey, Canada Housing Starts, UK Employment Data
Wednesday: US Building Permits, Housing Starts, Canada CPI, UK CPI, PPI
Thursday: US Existing home sales, Initial Jobless Claims, Eurozone CPI
Friday: US Leading Economic Index, Canada Retail Sales, Eurozone Consumer Confidence, UK Retail Sales
January 18, 2022
EUR/USD 1.1363 GBP/USD 1.3589 USD/CAD 1.2523 AUD/USD 0.7180 USD/JPY 114.58 USD/CNH 6.3526 USD/ILS 3.1325 USD/MXN 20.3727 USD/CHF 0.9161 USD/INR 74.5813 USD/BRL 5.5204 USD/SGD 1.3504 USD/DKK 6.5504 USD/SEK 9.0944 USD/NOK 8.7786
The dollar moved higher against most G-10 currencies, only the CAD and JPY managed gains against it. Investors are digesting the sudden rise in US Treasury yields and commodity prices. Focus this week will continue to be on corporate earnings. This morning, Goldman Sachs trading revenue was worse-than-expected, pushing its stock price down by over 3% in premarket trading.GBP
The UK pound fell earlier today in a strong dollar environment, even as UK labor data was better-than-expected. Unemployment fell to 4.1% in the quarter through November even as Omicron infections surged. Traders await inflation data to be released tomorrow.EUR
The euro is little changed overnight, defying this morning’s stronger US dollar. The closely watched ZEW Indicator of Economic Sentiment in Germany unexpectedly rose in January due to assumptions that coronavirus cases will fall significantly in Q2. German bunds (bonds) approach positive yields for the first time since April 2019.CAD
The Canadian dollar managed small gains against the strong US dollar, as crude oil prices soared to their highest levels since 2014. Traders also focus on next week’s Bank of Canada meeting when rates are expected to be hiked 15 bps from 0.25% to 0.40% on the back of a strong economy and rising inflation.ASIA/PACIFIC
The Japanese yen rose slightly, despite soaring US Treasury yields, which typically would drive the USD/JPY currency pair higher. The Bank of Japan kept interest rates unchanged even as they revised upwards their inflation forecasts. BOJ Governor Haruhiko Kuroda said the bank was in no rush to change its ultra-loose monetary policy as board members still believe that inflation will move to around 1%, well below its 2% target.
China’s central bank cut its policy rate for the first time in nearly a year in order to boost an economy struggling with a collapse of its real estate market and weak domestic consumption. The Chinese yuan initially rallied on the news, but then declined and is essentially unchanged from Friday’s close.
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