Follow-Through Dollar Buying After Yesterday's Reversal Tests The Bears

Overview: After reversing higher yesterday, the US dollar sees follow-through gains today, leaving the euro around a cent lower from yesterday's highs. Sterling's surge is also being tempered. Most emerging market currencies are lower as well. The jump in bond yields has stalled, but only after Australia and New Zealand yields surged eight basis points to play catch-up with the dramatic rise in the US yesterday that saw the 10-year benchmark trade near 1.31%. The yield has come back a little softer today at 1.29%. European bond markets are slightly softer. Profit-taking in US equities yesterday has also spilled over into today's activity, weighing on the Asia Pacific and European equities. The MSCI Asia Pacific Index fell for only the third time this month. Europe's Dow Jones Stoxx 600 is lower for the second consecutive session, while the US shares little changed with a heavier bias. In the face of rising yields and the dollar's bounce, gold took it on the chin. The 50-day moving average has slipped below the 200-day moving average for the first time in two years. It is trading near three-month lows today. The weather disruption continues to ripple across the US Midwest, leaving March WTI hovering in around a half dollar range on either side of $60. 

Asia Pacific

Japan's January trade deficit was about half of what economists expected (-JPY324 bln vs. -JPY625 bln.  Exports rebounded (6.4% vs. 2.0%), while the import recovery was weak (-9.5% vs. -11.6%).However, the details were revealing. Exports to China rose 37.5% year-over-year, bolstered by chip-making equipment. Exports to the US were off 4.8% year-over-year. Auto exports were weak. Shipments to Europe were 1.6% lower from a year ago. Some pundits may argue that China's trade surplus means it is a net taker from the world's aggregate demand, but such assessments do not do justice to China's imports from some countries, like Japan, even if not the US. Singapore also reported strong January exports today (12.8% year-over-year, more than twice the median in Bloomberg's survey). 

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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