Stocks fell for the first time in 8 sessions, while the US$ rose to a new 2018 high against its major counterparts, underpinned by surging bond yields (US10Y: 3.07%) and economic data pointing to underlying strength in the US economy, increasing the chances of a fourth Fed rate hike in 2018. The DXY is now at 93.25, having been up to 93.46 during the session. The US Retail Sales Control Group were in line with expectations, up 0.4%, while the figure for March was revised higher to 0.8%. Earlier in the day, the Euro came under pressure after more soft EU data, with the GDP and Industrial Production missing expectations.
The EM selloff (ARS, TLR) is spreading, with longstanding carry trades trapped and unable to cut positions without heavy losses. The Kiwi is caught in the fallout from the EM move and today broke a multi-year uptrend support line. The other major mover on the day was Gold, which fell by 2.1% after coming under pressure from the stronger dollar and bond yields. WTI was unchanged.
Wednesday will begin with the NZ April Credit Card Spending and the Australian Q1 Wage Price Index, along with the Japanese Preliminary Q1 GDP, Capacity Utilisation and Industrial Production for March. The main event in Europe will be the German/EU CPI (German; exp 0.0%mm, 1.6%yy; HICP, exp 1.4%yy, EU exp 0.3%mm, 1.2%yy; Core, exp 0.2%mm 0.7%%yy). That aside, the ECB Non-Monetary Policy will be taking place and Mario Draghi will also be speaking. The US will look to the April Building Permits, Housing Starts, Industrial Production and Capacity Utilisation for guidance along with speeches from the Fed’s Bostic and Bullard. The SNB’s Jordan and the ECB’s Coeure are also on the agenda.
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