US Dollar and Yields Rise ahead of Key Data

US Equities

US stocks traded higher earlier on Monday as the trade war tensions between China and the United States eased, especially after president Donald Trump pledged to help the Chinese technology company ZTE Corp to get back into the business. However, the rise of the US 10-yr yields above three percent level, pared the gains leading the stocks to end the session in red. The Retail sales data for April is important and awaited carefully by investors, especially after the drop in both Consumer Price Index and Import Price Index.


US dollar rebounded from almost two-week low as we approach key data. The dollar index, DXY, which measures the greenback strength against six major currencies was drifting lower on Thursday and Friday. A weaker-than-anticipated CPI and Import Price Index added pressures on the currency, as investors were afraid that a slowdown in inflation numbers will lower the chances of the Federal Reserve to hike interest rates three more times this year. The Retail sales data is due today, a better than expected reading should be positive for the inflation expectation.


The Euro fell yesterday against the US dollar after gaining for two consecutive days. EURUSD was close to $1.20 level for the first time in more than a week. The downside in the currency started with the weakening of major economic indicators in the Q1 of 2018 which limited the hawkish tone of the European Central Bank. The divergence in the monetary policy between the Fed and the ECB led to a gap in the interest rates, thus supporting the US dollar. In terms of data, the preliminary release of the Q1 GDP is due ahead of major CPI data tomorrow.


The British Pound fell more than six percent in the past weeks as investors were worried about the economic outlook after the soft economic data of Q1. The weakness in the economic indicators prohibited the Bank of England from raising rates in its meeting last week. The bank Governor, Mark Carney, said that they prefer to see the fundamentals picking up before raising rates again. Today, the job report is due, average earnings index will be monitored closely as a tick higher in the index might implement positive sentiment on the inflation outlook.


Gold tumbled yesterday as US treasury yields rose approaching multi-year highs. The Precious metal was pressured lately by the interest rate hikes of the Federal Reserve. Investors favored a yielding investment versus the non-yielding bullion. Gold prices are at a key support area near the $1300 psychological level, which is the lowest for the year.


Oil prices were almost stable near multi-year highs as OPEC forecasts higher oil demand in 2018. OPEC said that the Geopolitical Developments will impact supply in the months ahead. One live example of Oil supply disruption due to Geopolitics or political turmoil is the drop in Venezuelan output that declined to 1.505 million barrel per day. The weekly crude inventory from the American Petroleum Institute is due today.

The most important economic events:

GMT Country Event Expectation Previous
8:30 UK Average Earnings Index +Bonus (Mar) 2.7%  2.8% 
8:30 UK Claimant Count Change (Apr)  13.3  11.6
8:30 UK Unemployment Rate (Mar) 4.2% 4.2%
9:00 EU German ZEW Economic Sentiment (May) -8.0 -8.2
9:00 EU GDP (YoY) (Q1)  2.5% 2.5%
9:00 EU GDP (QoQ) (Q1) 0.4% 0.4%
12:30 US Core Retail Sales (MoM) (Apr) 0.5% 0.2%
12:30 US Retail Sales (MoM) (Apr) 0.4% 0.6%
14:00 US Business Inventories (MoM) (Mar) 0.2% 0.6%
20:30 US API Weekly Crude Oil Stock   -1.850


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