Bad US data may be dollar negative, good one will just make the world safe for risk

Outlook

The drop in pending homes sales is awful—down 11% y/y—and bodes ill for other housing data, if not this month, then soon. This morning we get March housing starts, expected up at a 970,000 pace for the first increase in 4 months, according to Bloomberg.

We also get MBA mortgage applications industrial production, the Atlanta Fed’s business inflation expectations, the oil inventory report, the Beige Book and Yellen’s speech. Any or all of these could be negative and re-start the whole tapering postponement scenario, which would be dollar-negative. Meanwhile, the usual asymmetry—if data is good, the dollar doesn’t benefit. Good US data just makes the world safe for risk.

Getting no press at all is the semi-annual Treasury report to Congress, released yesterday. According to Market News, the report again declines to name any country a currency manipulator but says there’s room for more Chinese yuan appreciation and transparency. It singles out S. Korea and wants it to restrict intervention only to disorderly conditions. Japan should do some structural reform and Germany should boost demand. We find the whole thing offensive. People who live in glass houses should not throw stones.

Reviewing all the stories today, we are troubled by the irrationality on display in oil and gold. The stories don’t add up. Why should oil rally like crazy on Ukraine at this point in time and at the same time, gold fall under the 200-day? This doesn’t fit the conventional risk appetite/aversion model. We don’t see any love for the dollar out there, but honestly, this kind of roiling should be dollar-favorable. Be careful. Watch the CAD and watch the yen.

Note to Readers: Friday is a holiday in some countries (and Monday, London is closed). We will not publish a morning report on Friday.