Dollar Powers On as US Yields Rise

Posted on

Market Drivers October 18, 2017
Dollar makes fresh weekly highs
UK Wage data not enough for GBP
Nikkei 0.13% Dax 0.41%
Oil $52/bbl
Gold $1279/oz.

Europe and Asia:
GBP UK Average Wage Gain 2.1% vs. 2.0%

North America:
USD Housing Starts/Permits 08:30
USD Biege Book 14:00

The dollar was well bid in early European trade today, boosted by rising US yields on 10-year bond which climbed above the 2.33% level.

For the second day in a row, the greenback appeared to have some life in it as FX markets once again started to focus on the prospect of monetary policy divergence theme. Yesterday’s cautious testimony by BoE MPC members brought forward the idea that the Fed may be the only G-7 central bank to actually tighten rates again this year, and that realization has been helping to drive the buck higher. USDJPY rose to 112.72 in morning European dealing and looks to challenge the 113.00 level as the day proceeds.

The high yielders were one of the bigger losers of the night as both AUDUSD and NZDUSD declined on carry trade flows as US yield continued to rise.

The biggest mover of the night, however, was cable which did a complete flip in the wake of UK labor data reports. Although UK average wage gains slightly beat expectations at 2.% versus 2.0% eyed they were still far below the 3.0% inflation rate. UK real wages, therefore, declined by a whopping -0.9% and that factor along with a slight rise in Claimant count change weighed on sterling as it turned away from the 1.3200 figure and traded all the way down to 1.3140 before finding a bid.

In North America today, the docket contains only a smattering of second-tier housing data as well as Beige Book results later in the afternoon. If both data points prove supportive and the rally in US yields continues, USDJPY stands a strong chance of running the 113.00 barrier as the day proceeds.

Boris Schlossberg
Managing Director

Leave a Reply

Your email address will not be published. Required fields are marked *