DXY appreciated the fifth session by 0.2% to 106.21, its best close since early November. Within the basket, the JPY took the brunt of the USD’s strength, depreciating 0.7% to 154.27 per USD, its worst level since mid-1990. Markets will be alert to intervention risks around 155. EUR depreciated a fourth session by 0.2% to 1.0624. Breaking this level, the 75% Fibonacci retracement level of EUR’s rally in 4Q23 would open the door towards the 1.05 low last October. CAD also fell a fourth day by 0.1% to 1.3787 per USD, approaching 1.39, or its weakest level at the start of November. Although the CHF bucked the USD’s strength and appreciated 0.2%, USD/CHF has been trapped between 0.9080 and 0.9150 in the past three sessions. With markets pushing out Fed cuts to September, EUR, CAD, and CHF remain pressured by expectations for their central banks to cut rates in June.
The US Treasury 10Y yield increased 8 bps to 4.60%, its highest close since mid-November. The yield initially rose to an intra-day high of 4.66% on stronger-than-expected US retail sales of 0.7% MoM in March vs. the 0.4% consensus; February was also revised to 0.9% from 0.6%. With the data cementing expectations for the PCE deflator to mirror the strength in CPI inflation, markets brushed aside New York Fed President John Williams’ comments about looking to lower interest rates on slowing inflation this year. Today, consensus expects capacity utilisation to improve to 78.5 in March from 78.3 in February. However, the 10Y yield came off its highs from WTI crude oil prices rebounding from the session’s low of USD84/barrel to USD85.41, near last Friday’s close.
The ongoing conflict between Israel and Iran in the Middle East had a significant impact on the US stock market. Fearful that the tit-for-tat attacks this month would lead to a wider conflict, investors dumped US stocks. The Dow, S&P 500, and Nasdaq Composite Indices fell 0.7%, 1.2%, and 1.8%, respectively, with all three indices closing below their 50-day moving averages. The VIX Volatility Index rose 11% to 19.2, on top of Friday’s 16.1% surge, to its highest level since the end of October. The Dow has fallen 5.2% this month to 37735, its lowest level since mid-January.
Risk aversion will weigh on the Australasian and emerging Asian currencies. NZD depreciated most by 0.7% on Monday, followed by 0.4% in the AUD. The KRW depreciated to 0.6%, mirroring the JPY’s weakness, with players keeping an eye on the Bank of Korea taking necessary steps to address excessive currency volatility. The VND was the worst-performing Southeast Asian currency, depreciating 0.6% to a record low of 25200 per USD. The PHP was next with a 0.5% loss to 56.8, its weakest close since early November. The Philippine central bank (BSP) said it hardly intervened in the FX market and would delay rate cuts to 2025 on inflation.
Quote of the day
" If we desire to avoid insult, we must be able to repel it; if we desire to secure peace, one of the most powerful instruments of our rising prosperity, it must be known, that we are at all times ready for War.”
George Washington
16 April in history
In 1789, George Washington started his 200-mile journey by carriage to be sworn in as the first US President.
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