The moderate rebound in the buck as explained in this 20 April US Dollar Trading Outlook, has been in tandem with higher yields in the US money markets. The 2-year and 5-year references are trading in multi-year peaks. Will the USD gains stay?
20 April, ADS Securities – The US Dollar rallies once again dragging the European majors to fresh lows! This is the key theme of the financial markets towards the end of the week with the US currency lifted by the push higher in the US Treasury yields that broke above the 2.9% mark yesterday.
Rising Treasury Yields: 20 April US Dollar Trading Outlook
We highlighted yields’ rally yesterday and indeed it was this development that attracted investors’ attention that responded with strong gains for the Dollar yesterday pushing the Dollar Index to the 90 mark.
Dollar/Yen continues to move higher trading just shy of last week’s highs. The rise in Treasury yields combined with a slower inflation reading from Japan are contributing to the gains and the currency pair is now just a few pips away from the 107.80 barrier.
This will be an important test for the rallying pair as a break above the 108 mark will expose the 109 area as the Dollar continues to move higher; otherwise, a consolidation between 107 and 107.80 is the most likely alternative.
British Pound Trading Outlook
The British Pound is among the major losers this week following softer than expected UK data and Dollar’s surge. Sterling is trading below the 1.41 mark this morning after yesterday’s bearish Retail Sales report, as we indicated in our previous note consumer spending slowed down in March on the back of lower inflation and wage growth.
Now the important question is whether this pullback in data will force the Bank of England to delay raising rates, the odds for a move next month are currently at 85% but if traders continue taking profits off the table the Pound will cover further towards the key 1.40 psychological support.
Asia Equities Markets
Equities in Asia are trading in the red for the last session of the week after a negative day for US stocks. The US Treasury gains are weighing down on global stocks and the European opening is expected to be marginally bearish with investors opting for some cautiousness over the weekend.
However, expectations for a strong earnings’ season should keep stocks supported and losses should be limited. Market participants are anxious to see what kind of an effect President Trump’s tax reform is having on corporate earnings and the consensus in the market is that Q1 2018 was another strong quarter for US companies.
ADS Securities Risk Disclaimer
This article was provided by analysts of ADS Securities.
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