Dollar Rebounds, US GDP Revised Up, Bond Yields Soar

Strong Economic Data Sees Fed Rate Hike, JPY Tumbles

Summary:

The Dollar Index (DXY), a favorite measure of the Greenback’s value against a basket of 6 major currencies rebounded to 103.35, from 102.70, a two-week high.

Further signs of robust US economic data lifted US bond yields, strengthening the case for further Fed rate hikes. US Q1 GDP rose to 2% from a previous 1.3%, and higher than estimates at 1.4%.

US Claims for Unemployment Benefits in the latest week dropped to 239,000, against the previous week’s 265,000. Expectations for the Jobless Claims number were at 264,000.

The US 10-year treasury bond yield jumped 11 basis points to 3.84%. Two-year US treasuries settled with a yield at 4.86% (4.74% yesterday). Other global rates rose, but less than their US counterpart.

Against the Japanese Yen, the US Dollar jumped to close at 144.75 from 144.15. The Greenback traded to a high at 144.90, a near 7-month peak, and approaching the key 145 resistance level.

This was the level that Japanese authorities intervened to strengthen the Yen in September and October last year.

The Euro (EUR/USD) plummeted to 1.0865 from 1.0950. Despite hawkish sentiment from the ECB (European Central Bank), concerns about the potential impact of higher rates on the Eurozone economy weighed on the shared currency.

Sterling (GBP/USD) tumbled to 1.2611 against 1.2670 yesterday. Bank of England Governor Andrew Bailey said that interest rates could continue to rise, hurting the British economy.

The Aussie (AUD/USD) fell to 0.6620 from 0.6650 while the Kiwi (NZD/USD) slid to 0.6080 against 0.6120. The Australian Dollar traded to an overnight and 3-week low at 0.6595.

The US Dollar rose against the Asian and Emerging Market currencies. USD/CNH (Dollar-Offshore Chinese Yuan) jumped to 7.2700 from 7.2250. The Greenback soared against the Singapore Dollar (USD/SGD) to 1.3562 from 1.3492 Wednesday. USD/THB (Dollar-Thai Baht) climbed to 35.62 (35.27).

Other economic data released yesterday saw Australia’s Retail Sales (m/m) rise to 0.7% from 0.0%. Japanese Consumer Confidence was unchanged at 36.2.

UK Net Lending to Individuals (m/m) rose to GBP 1.1 billion, higher than expectations of -0.6 billion and a previous 0 billion (flat). Spain’s Flash CPI rose 1.9%, against forecasts of a 1.7% up.

EUR/USD – The shared currency fell to 1.0865 from yesterday’s 1.0950 against the broadly based stronger US Dollar. Robust economic data out of the US lifted bond yields which supported the Greenback. The overnight high traded for the EUR/USD was at 1.0941.USD/JPY – Against the Japanese Yen, the Greenback soared to 144.75 in late New York from 144.15 yesterday. The Greenback hit a high at 144.90 before easing. The 11-point jump in the US 10-year yield to 3.84% contrasted with that of Japan, which rose 2 basis points to 0.37%.GBP/JPY – The British Pound slumped to 1.2611 from 1.2670 yesterday. In another volatile trading day, the GBP/USD saw a high at 1.2667 before tumbling to an overnight low at 1.2591 before settling. Comments from BOE Governor Bailey weighed on the British currency.AUD/USD – The Aussie Dollar dipped to 0.6620 from 0.6650 yesterday. Overnight, the Australian Dollar saw a high at 0.6640. Broad based US Dollar strength weighed on the Aussie Battler which traded to an overnight low at 0.6595.On the Lookout:

The week finishes with a busy economic calendar today.

Japan kicks off with its June Tokyo Headline and Core CPI data (y/y Headline f/c at 3.2% from 3.2%; y/y Core f/c at 3.3% from 3.2%, Japanese May Unemployment Rate (f/c 2.6% from 2.6% - ACY Finlogix), Japanese May Industrial Production (m/m f/c -1.0% from 0.7%; y/y f/c -0.2% from -0.7% - ACY Finlogix).

Australia follows with its May Housing Credit (f/c 0.3% from 0.3% - ACY Finlogix), and Japanese May Housing Starts (f/c -2.2% from -11.9% - ACY Finlogix).

Australia releases its May Private Sector Credit (f/c 0.4% from 0.6% - ACY Finlogix).

China releases its June Manufacturing PMI (f/c 52 from 48.8 – ACY Finlogix), Chinese June Non-Manufacturing PMI (f/c 53 from 54.5 – ACY Finlogix).

Germany starts off Europe with its May Retail Sales (m/m f/c 0% from 0.8%; y/y f/c -4.3% from -4.3% - ACY Finlogix).

The UK follows with its Nationwide Housing Prices (m/m f/c -0.3% from -0.1%; y/y f/c -4% from -3.4% - ACY Finlogix), UK Final GDP Growth Rate (q/q f/c 0.1% from 0.1%; y/y f/c 0.2% from 0.6% - ACY Finlogix).

Switzerland releases its May Retail Sales (y/y f/c -2.5% from -3.7% - ACY Finlogix).

France follows with its Preliminary June Inflation Rate (y/y f/c 4.6% from 5.1% - ACY Finlogix).

Germany follows with its German May Unemployment Rate (f/c 6.5% from 6.5% - ACY Finlogix).

The Eurozone releases its May Unemployment Rate (f/c 6.5% from 6.5% - ACY Finlogix), Eurozone June Flash CPI (f/c 5.6% from 6.1%; Eurozone Core Inflation Rate (f/c 5.5% from 5.3% - ACY Finlogix).

Canada kicks off North America with its April GDP (m/m f/c 0.2% from 0.0% - ACY Finlogix), Canadian May Preliminary GDP (m/m f/c 0.0% from 0.2% - ACY Finlogix).

The US rounds up today’s reports with its May Personal Income (m/m f/c 0.3% from 0.4% - ACY Finlogix), US May Personal Spending (m/m f/c 0.2% from 0.8%), US May PCE Price Index (m/m f/c 0.2% from 0.4%; y/y f/c 4.1% from 4.4% - ACY Finlogix) and US May Core PCE Price Index (m/m f/c 0.3% from 0.4%; y/y f/c 4.7% from 4.7% - ACY Finlogix).

Trading Perspective:

Expect more choppy trade to end a volatile week amidst an economic data dump today.

Month end and half year end for many corporations will also play havoc with market liquidity.

The Dollar finished stronger against all its Rivals, rebounding as markets look to at least two more Federal Reserve rate hikes in the next few months.

USD/DXY soared to 103.35 against 102.70 yesterday.

US treasury bond yields soared with the benchmark 10-year rate finishing at 3.84%, the highest in 3 months.

While the Dollar should hang on to its gains, profit-taking and position adjustments will keep it trade choppy.

EUR/USD – The shared currency fell under the weight of a broadly based stronger US Dollar, sliding to a 1.0865 finish. Look for immediate support at 1.0850 followed by 1.0820 to hold. Immediate resistance can be found at 1.0900 and 1.0940 (overnight high traded was 1.0941). Look for more choppy trade in the Euro, likely between 1.0840-1.0940. Trade the range.USD/JPY – Against the Yen, the Greenback jumped to an overnight and near 7-month high at 144.90 before easing to settle at 144.75. Immediate resistance today lies at 145.00, followed by 145.30. Immediate support can be found at 144.30 and 144.00. Look for more choppy trade today, likely between 144.00-145.00. Look for more rhetoric from Japan Inc today regarding Yen weakness.

(Source: Finlogix.com)

AUD/USD – The Australian Dollar eased against the Greenback to 0.6620 from 0.6650. Overnight the Aussie Battler slumped to a low at 0.6595. On the day, look for immediate support at 0.6580 followed by 0.6550. Immediate resistance can be found at 0.6640 and 0.6670. Look for more choppy trade in the Aussie, likely between 0.6580 and 0.6680. Prefer to buy Aussie dips today. Aussie traders are short heading into the weekend.GBP/USD – Sterling was pounded lower against the broadly based stronger Greenback, settling at 1.2611 (1.2670 yesterday). On the day look for immediate support at 1.2590 (overnight low traded was 1.2591). The next support level is found at 1.2560. On the topside look for immediate resistance at 1.2640 and 1.2670. Look for the British currency to trade a choppy range between 1.2580-1.2680. Trade the range today, nice and wide.

Happy Friday and trading all. And a top weekend ahead.

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