Risk Appetites Return Bigly
Today’s Highlights
- • US yields still are not considerably supportive of the dollar. The US dollar is mixed against the major currencies.
- • Japan’s economy shrank by 1.3% in Q1 on a quarter-over-quarter basis. This was a greater decrease than what was projected and driven by a 1.4% fall in business spending rather than an increase as expected.
- • The UK’s data revealed that its economy rebounded starting in March as today’s employment data shows claims fell in April, and revised figures show a decline in March.
- • In the US, April housing starts and permits are expected to show a minor decrease. However, activity in the housing market is robust and around its greatest level since 2006.
In Asia, equities markets rallied strongly, led by the more than 5% gain in Taiwan, the most in over a year as Monday’s 3% drop was more than overcome. The Nikkei gained more than 2% despite the deeper than expected contraction in Q1 GDP. Hong Kong, South Korea, and India also rose more than a 1% gain as tech came roaring back.
In Europe, where equities have edged higher, the focus seemed to shift to the foreign exchange market, and the dollar was sold off, with the euro climbing above $1.22 and sterling pushing above $1.42.
Only the Canadian dollar, Swedish krona, and Japanese yen rose less than 0.3%. Emerging market currencies, led by eastern and central Europe, are broadly higher, and the JP Morgan Emerging Market Index is up for the fourth consecutive session. The Turkish lira, a notable exception, is sporting a softer profile.
US yields continue to deny the greenback much support. The 10-year benchmark is hovering around 1.65%, little changed on the day, while European yields are slightly softer.
Gold traded at four-month highs today over $1870 and is consolidating in the European morning. Oil prices are also higher, with Brent testing $70 and July WTI probing $67.
Marc Chandler
Managing Director
Bannockburn Global Forex
www.bannockburnglobal.com
