US Dollar, EUR/USD, Euro, China CPI, GBP/USD, Bank of England, Japanese Yen, EUR/USD, European Central Bank – Talking Points
- the U.S. dollar been undermined before CPI lower Treasury yields
- China’s CPI fell in April as central bank pivots entered the conversation
- All eyes will be on the BoE today but ECB members may also have something to say
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The US dollar fell overnight after the headline CPI came in at 4.9% y/y through the end of April instead of the estimated 5.0% previously. Core CPI was in line with expectations for the same period, coming in at 5.6%.
Interest rate markets have doubled down on bets that the Fed will cut its rate target by the end of the year. The futures markets and overnight index swaps (OIS) are seeing nearly 25 basis points (bp) of monetary policy at the FOMC meeting in September.
Treasury yields have fallen across the yield curve as of this time yesterday, with the benchmark 2-year note close to 3.90%. It should be noted that returns across all pay periods are still comfortably higher than they were in March after the collapse of SVB Financial.
US Treasury Secretary Janet Yellen spoke at the G7 Finance Ministers meeting in Tokyo today. And she reiterated many of her recent comments about the importance of resolving the issue of the US debt ceiling,
China’s inflation reading was also weak today with the core CPI coming in at 0.1% y/y through April end vs. the 0.3% estimate in March’s print of 0.7%. The PPI came in at -3.6%, instead of the expected -3.3% and -2.5% previously.
Chinese government bond (CGB) yields fell with the 10-year note dropping below 2.7% today for the first time since November last year. There are also hopes in the market for more dovishness from the People’s Bank of China (PBOC) and an emerging easing of price pressures.
GBP/USD continues to strengthen near the 12-month high of 1.2680 seen yesterday with the BoE rate decision today. A Bloomberg survey of economists expects a rise of 25 basis points, to 4.50%.
Japan’s current account surplus was solid at 2947 billion yen for the month of March instead of the expected 2278 yen. USD/JPY is little changed at 134.25 at press time.
Gold and Crude Oil have made slight gains so far today on the back of weakness in the US dollar and Asia-Pacific stock indices that have somewhat stagnated in the trading day.
A slew of ECB speakers will cross wires as well as Kashkari and Waller from the Fed.
The full economic calendar can be viewed here.
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Technical analysis of the EUR/USD pair
The EUR/USD appears to be in a precarious position above several potential support levels.
The area 1.0910 – 1.0945 contains many previous breakouts and lows as well as an upward trend line. A clear break below this area could show bearish momentum.
If a sharp move below there will develop soon, the price will also drop below the lower band of the 21-day simple moving average (SMA) based on the Bollinger Band. This may indicate a volatility breakout.
On the upside, resistance may be offered at previous highs in the 1.1075 – 1.1100 area.
– By Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @tweet on Twitter
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