We saw the dollar drive higher against most currencies during yesterday’s trading as increased Geo-Political concerns, higher US bond yields and solid US Retail Sales data all hit the market. The equity markets were on the back foot as concerns to global growth once again came to the fore, North Korea cancelled a meeting with the South after feeling threatened by US/South Korean military exercises and the increase in violence in the middle east also has investors wary of further escalation – Oil currently trading around $71/barrel. The US treasury market saw strong moves with yields in the benchmark 10 Yr breaking up through recent highs and the 30 Yr also close to long term resistance at 3.20.
Asian markets have opened in the red this morning as expected, and investors will be watching the market carefully as some of the traditional correlations are breaking down with current market dynamics. The usual buying of the safe haven Yen has failed to materialize in it’s normal manner as the stronger US yields have supported UsdJpy and led to little downside for the Yen crosses. Gold is also on the back foot as dollar buying across the products superseded the usual attraction of the precious metals.
Looking ahead to today’s trading sessions and focus in the Asian session will turn to Australia as the Quarterly Wage Price Index is due this morning, there’s little else out in terms of fundamental data releases until we hit the London open where we have ECB President Draghi speaking shortly after the release of the Final Eurozone CPI number. Into the New York session and we have Building Permit numbers due out of the states as well as hearing from FOMC member Bostic later in the day. In general, the market will continue to focus on the various Geo-Political and Trade concerns that are still simmering close to the surface with a strong focus on the US treasuries and consequent dollar strength.