11 Jun 2015
Rising US yields supporting USD, focus on US retail sales – RBS
FXStreet (Barcelona) - According to Greg Gibbs, FX Trading Strategist at RBS, the rising US yields will prevent any significant falls in the dollar, and further adds that attention will shift to US retail sales data to be released today, with markets expecting a good rebound.
Key Quotes
“US yields have risen in recent weeks as confidence grows that the Fed will begin its tightening cycle later his year. Against the other major economies, the USD yield advantage has increased. Even against the EUR, as discussed yesterday, at the front half of the yield curve, which matters most for FX, the USD yield advantage has increase to a new cyclical high. Across the entire yield curve, the USD yield advantage against the JPY has risen to a new high.”
“As such, further significant falls in the USD are unlikely, as relative interest rate and overall monetary policy trends reassert there influence.”
“On Wednesday, US weekly mortgage applications data showed new mortgages written to purchase houses rose to a high since mid-2013. Overall, mortgage applications remain low, but this rise, at the same time as mortgage rates have been rising, suggests that underlying housing demand may be firming and credit conditions easing. This may be one of the headwinds to growth that are diminishing in the USA.”
“Tonight attention will turn to retail sales that have been weaker than expected since December. In particular, a weak April result reported last month, undermined the USD briefly suggesting the slower growth in Q1 related to weather might be a more permanent trend. Naturally the market is looking for a solid bounce back in May.”
Key Quotes
“US yields have risen in recent weeks as confidence grows that the Fed will begin its tightening cycle later his year. Against the other major economies, the USD yield advantage has increased. Even against the EUR, as discussed yesterday, at the front half of the yield curve, which matters most for FX, the USD yield advantage has increase to a new cyclical high. Across the entire yield curve, the USD yield advantage against the JPY has risen to a new high.”
“As such, further significant falls in the USD are unlikely, as relative interest rate and overall monetary policy trends reassert there influence.”
“On Wednesday, US weekly mortgage applications data showed new mortgages written to purchase houses rose to a high since mid-2013. Overall, mortgage applications remain low, but this rise, at the same time as mortgage rates have been rising, suggests that underlying housing demand may be firming and credit conditions easing. This may be one of the headwinds to growth that are diminishing in the USA.”
“Tonight attention will turn to retail sales that have been weaker than expected since December. In particular, a weak April result reported last month, undermined the USD briefly suggesting the slower growth in Q1 related to weather might be a more permanent trend. Naturally the market is looking for a solid bounce back in May.”