Dollar, Bond Yields Rebound on Mixed Data, Fed Speak

Yen Weakens on GDP Miss, AUD Eases on Jobless Rise

Summary:

The Dollar Index (DXY), which weighs the value of the Greenback against a basket of 6 major currencies, rebounded to 104.50 from 104.30 despite mixed US economic data. 

The US Core Inflation rate slowed in April to an annualized 3.6% in April, down from 3.8% previously. US April Retail Sales weakened modestly to 0.3% from a downward revised 0.6% (0.7%) in March. 

April Headline Inflation (y/y) in the US printed at 3.4%, matching expectations. New York Federal Reserve President John Williams said he still needs more evidence to adjust interest rates. 

After initially falling, US bond yields rebounded. The benchmark 10-year climbed to 4.37% from 4.34%. The 2-year US bond rate rose 7 basis points to 4.80%. Other global bond rates edged up.

The Australian Dollar (AUD/USD) eased to 0.6677 (0.6700) after Australia’s Jobless Rate unexpectedly climbed to 4.1% from 3.9%. Australia’s economy created a total of 38,500 jobs in April, beating forecasts of 22,400 jobs. 

Against the Japanese Yen, the Dollar (USD/JPY) soared to 155.40 from 154.20 yesterday. Japan’s Preliminary GDP contracted 2% annually, against forecasts of 1.5%, weighing on the Yen. 

The Euro (EUR/USD) dipped to 1.0870 (1.0877) while Sterling (GBP/USD) settled at 1.2670 from 1.2675 yesterday. Earlier in the day, Sterling soared to 1.2700, its highest level in 5 weeks. 

Against the Asian and Emerging Market Currencies, the US Dollar rose modestly. The USD/CNH pair (Dollar-Offshore Chinese Yuan) steadied to 7.22 (7.2230). 

Reports that China is considering a proposal for local governments to purchase millions of unsold homes in a bid to stabilize the property market supported the Chinese Yuan.

The USD/SGD pair (Dollar-Singapore Dollar) rallied to 1.3460 from 1.3440, while USD/THB rallied to 36.22 (36.15). 

Other economic data released yesterday saw Japan’s Revised Industrial Production climb to 4.4% (m/m), bettering estimates at 3.4% and a previous 3.8%. US Initial Jobless Claims dipped to 222,000 from 232,000 previously, but higher than median forecasts at 220,000.

The US Philadelphia Fed Manufacturing Index for May slumped to 4.5 from 15.5, missing expectations at 8. US April Industrial Production fell to 0% from 0.1% previously. 

• AUD/USD – the Aussie Battler eased to 0.6677 in late New York after trading to 0.6714 overnight near 2024 highs. Despite creating a total of 38,500 jobs in April, beating estimates of 22,400, Australia’s Unemployment Rate jumped to 4.1% from 3.9%.
• USD/JPY – the Greenback rebounded against the besieged Japanese Yen to 155.40 from 154.20 yesterday. After dropping initially, US bond yields rebounded following comments from New York Federal Reserve Head, John Williams. The overnight low traded was 153.60 while the overnight high recorded was 155.54.
• EUR/USD – The shared currency dipped to 1.0870 from 1.0877 against the broadly based stronger Greenback. The Euro traded to an overnight high at 1.0895 before easing. In steady trade, the overnight low recorded for the EUR/USD pair was 1.0854.
• GBP/USD – Sterling settled in late New York at 1.2670 (1.2675 yesterday). The British Pound traded to an overnight and fresh 5-week high at 1.2700. Broad-based US Dollar strength eventually weighed on the British currency.

On the Lookout: 

Welcome to Friday all! To finish off the week, China releases its trifecta of Retail Sales, Industrial Production and Fixed Asset Investment, as well as the Unemployment Rate and House Price Index. 

Annual April Retail Sales in China are forecast to climb to 3.7% from 3.1% - ACY Finlogix). This is followed by Chinese April Industrial Production (y/y f/c 5.4% from 4.5% - ACY Finlogix), Chinese April Fixed Asset Investment (ytd y/y f/c 4.6% from 4.5% - ACY Finlogix). 

China also releases its April Unemployment Rate (f/c 5.2% from 5.2% - ACY Finlogix) and finally Chinese House Price Index (y/y f/c -3.0% from -2.2% - ACY Finlogix). France kicks off Europe with its French Unemployment Rate (f/c 7.4% from 7.5% - ACY Finlogix). Switzerland follows with its Swiss Industrial Production (y/y f/c -1.2% from -0.4% - ACY Finlogix). China releases its April Foreign Direct Investment (y/y f/c -25.0% from -26.1% - ACY Finlogix). 

The Eurozone releases its final April Inflation Rate (y/y f/c 2.4% from 2.4% - ACY Finlogix), Eurozone April Core Inflation Rate (y/y f/c 2.7% from 2.9% - ACY Finlogix). Canada kicks off North America with its Canadian New Housing Price Index (m/m f/c 0.0% from 0%; y/y f/c -0.3% from -0.4% - ACY Finlogix). 

The US rounds up today’s data releases with its US April CB Leading Index (m/m f/c -0.3% from -0.3% - ACY Finlogix). Federal Reserve FOMC members Christopher Waller and Mary Daly are scheduled to speak at different events. 

Trading Perspective: 

After initially falling following the release of the slower inflation data and retail sales, the US Dollar rebounded off its lows to finish with modest gains. Comments from New York Federal Reserve President John Williams who said he still needs more evidence to adjust interest rates lifted the Greenback. The Greenback also gathered strength from weaker-than-expected Japanese GDP and a rise in Australia’s Jobless rate. 

The focus today shifts to China with the release of its Industrial Production, Retail Sales, and Fixed Asset Investment. All data are expected to improve. The risk is for a disappointment. Which could weigh on risk sentiment, stocks, and the Greenback. We could be in for one of those “get ready to rumble” Fridays. Tin helmets on!

• AUD/USD – The Aussie Dollar eased against the overall stronger Greenback to close at 0.6677. In overnight trade, the Aussie Battler soared to an overnight and near-2024 high at 0.6714. Immediate resistance lies at 0.6700 followed by 0.6720 and 0.6750. On the downside, immediate support can be found at 0.6670, 0.6640 and 0.6610. Look for more choppy trade in the Aussie today, likely between 0.6620-0.6720. Sell Aussie rallies.
• USD/JPY – against the Japanese Yen, the US Dollar soared 0.72% to 155.40 from 154.20 yesterday. On the day, look for immediate resistance at 155.60 (overnight high traded was 155.54). The next resistance level lies at 156 and 156.50. Immediate support can be found at 155.00, 154.50 and 154.00. Look for more choppy trade in this currency pair, likely between 153.70-155.70. Be nimble and trade the range. Eyes open for Japan Inc.

• EUR/USD– the Euro dipped to finish at 1.0870 from 1.0877 yesterday. Look for immediate resistance at 1.0900 followed by 1.0940. Immediate support can be found at 1.0840, 1.0800, and 1.0760. Look for the shared currency to consolidate in a likely trading range today of 1.0810-1.0910. Preference is to sell Euro on strength.
• GBP/USD – Sterling steadied to finish at 1.2670, little changed from 1.2675 yesterday. On the day, immediate resistance can be found at 1.2700 (overnight high) followed by 1.2730. Immediate support lies at 1.2640 (overnight low traded was 1.2643). The next support level is found at 1.2610. Look for the British Pound to trade in a likely range today of 1.2620-1.2720. Trade the range, nice and wide…plus its Friday today.

Happy trading and Friday all, a top weekend ahead. 

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