Risk-Off Returns as 10 Year US Treasuries Test 3% Level

The market turned yesterday as the 3% level on the US 10 Year was tested and the 2-10 yield spread climbed from multi-year lows set earlier in the month. This caused some weakness in the USD, although it has regained some strength this morning. Equities were down over 1% yesterday in risk-off markets, with USDJPY also taking a hit despite starting the day strong. JPY crosses took the hit late in the day but have recovered well overnight. Gold moved higher to $1332.50 resistance but has fallen lower again, while oil fell from its $69.30 high to support at $67.50. Markets are set to remain choppy today as traders seek direction on a day of light economic calendar activity, with US Treasuries remaining in focus.

German IFO – Current Assessment (Apr) was 105.7 v an expected 106.0, from 125.9 previously which was revised down to 110.6. IFO – Expectations (Apr) were 98.7 v an expected 99.5, from 104.4 prior, which was revised down to 101.0. IFO – Business Climate (Apr) was 102.1 v an expected 102.7, v 114.7 previously, which was revised down to 105.7. This index rebased yesterday, from the year 2005 to a base year of 2015. This means last month’s Business Climate reading of 114.7 changed to 103.2. This was to include the service sector for the first time, which makes up nearly 60% of GDP. The data showed a weakening business climate in Germany, as expected. This data cannot be ignored as it surveys 7,000 businesses and is a leading indicator of economic direction. EURUSD moved higher from 1.21988 to 1.22110 after the release.

US House Price Index (MoM) (Feb) was 0.6% v an expected 0.5%, v 0.8% previously, which was revised up to 0.9%. This data slipped lower after a strong improvement last month but beat the expected 0.5%. S&P/Case-Schiller Home Price Index (YoY) (Feb) was 6.8% v an expected reading of 6.3%, against a prior 6.4%. This data point has been holding steady since the late 2014 low. The data surprised to the upside, with the highest reading since September 2014. This shows a strong housing market in the US, although supply remains an issue. USDJPY moved higher from 108.787 to 109.061 as a result of this data.

US New Home Sales (MoM) (Mar) were 0.694M against an expected reading of 0.630M, from 0.618M previously, which was revised up to 0.667M. New Home Sales Change (MoM) (Mar) was 4.0% against an expected 1.9%, from -0.6% previously, which was revised up to 3.6%. On the back of strong Existing Home Sales data on Monday, the trend improved further after having fallen for three months since the November high. The improvement in these figures shows a pickup in confidence in the US housing market, with a beat on the headline number, but, more importantly, big positive revisions. This rounds out what has been a very good couple of days for US Housing data. USDJPY hit a low of 108.935 after the release but subsequently turned higher to 109.125.

EURUSD is down -0.15% overnight, trading around 1.22128.

USDJPY is up 0.21% in early session trading at around 109.041.

GBPUSD is down -0.10% this morning trading, around 1.39618.

Gold is down -0.26% in early morning trading at around $1,326.79.

WTI is down -0.24% this morning, trading around $67.59.