Dollar catches a bid on rising U.S. yields and mildly upbeat U.S. retail sales data

Market Review - 15/05/2018  23:30GMT  

Dollar catches a bid on rising U.S. yields and mildly upbeat U.S. retail sales data

The greenback snapped its recent losing streak and climbed broadly higher against majority of its peers on Tuesday to fresh 4-month highs due to surging U.S. Treasury yields where the benchmark 10-year Treasury yield hit fresh 7-year highs of 3.0945% as well an upward revision on key U.S. retail sales data.  
  
The Commerce Department said on Tuesday that retail sales rose 0.3 percent last month. Data for March was revised up to show sales surging 0.8 percent instead of the previously reported 0.6 percent rise.   
  
Versus the Japanese yen, dollar traded with a firm bias in Asia and climbed to 109.93, then 109.99 at European open and later hit a 3-month high of 110.42 in New York afternoon on strong rise in U.S. Treasury yields and upbeat U.S. retail sales data.  
  
Although the single currency edged up to 1.1938 in Asian morning, price met renewed selling there n fell to 1.1911 at European open. Intra-day selloff accelerated in New York morning and euro tumbled to a fresh 4-1/2-month low of 1.1820 after IMF reduced growth forecast for the euro zone together with upbeat U.S. retail sales data before rebounding to 1.1875 on short-covering. Price last traded at 1.1837 near the close.  
  
The IMF forecast that growth in advanced European economies, mainly the euro zone, would slow to 2.3 percent this year from 2.4 percent in 2017 and then decelerate to 2.0 percent in 2019. The European Commission forecasts the same growth slow-down.  
  
The British pound went through a volatile session. Price initially fell fm 1.3572 in Asian morning to 1.3525 in European morning before rebounding to 1.3558 on upbeat UK jobs data. However, in-line wage growth data suggested Bank of England may delay time frame of interest rate hike and broad-based usd's strength sent cable to a fresh 4-1/2 month low of 1.3452 in New York morning before rebounding to 1.3527 on short-covering.  
  
Employment in Britain rose by 197,000 during the first three months of this year, official data showed, the biggest jump since late 2015 and far exceeding the 130,000 consensus expectation of a Reuters poll of economists.  
  
Annual growth in earnings, excluding bonuses, edged up to 2.9 percent in the three months to March after a 2.8 percent rise in February, the Office for National Statistics (ONS) said on Tuesday, as expected in the Reuters poll.   
  
In other news, Reuters reported Italy's anti-establishment 5-Star Movement and far-right League faced stark differences over both policies and personalities on Tuesday as they held a sixth day of talks to create a coalition government.  
  
Reuters reported Dallas Federal Reserve President Robert Kaplan said on Tuesday he is keeping an eye on the shape of the U.S. yield curve and would be wary if it were to invert, a market move that has often preceded recent U.S. recessions.   
  
On the data front, Eurostat said the euro area economy grew by an annualized 2.5% in the three months to March, in line with the preliminary estimate. That was down from 2.7% annual growth in the fourth quarter. The economy expanded by 0.4% in the first quarter.  
  
Data to be released on Wednesday :  
  
Japan GDP, GDP annualised, GDP deflator, industrial production, capacity utilization, China House price, Australia wage price index, Germany CPI, HICP, Italy industrial output, industrial sales, CPI final, CPI (EU Norm) final, HICP final, core HICP, Canada manufacturing sales, and U.S. MBA mortgage application, building permits, housing starts, industrial production, capacity utilization, manufacturing output.