We end the week on a similar footing to the ones before, with treasuries remaining buoyed while equities continue to push higher. In four of the last six weeks, the 10 year treasury note has printed weekly highs above 2.5%, but has failed to hold on all occasions. This looks set to be the case again as Yellen’s somewhat hawkish speech on Wednesday again failed to hold levels above here. Continued failure to break this level could start to weigh on dollar sentiment, which may result in a pullback in the dollar index in the coming weeks.
Also keeping pressure on global yields are upcoming elections in the Netherlands, France, Germany and possibly Italy. The current political landscape worldwide is unlikely to change soon, nor will the debates surrounding Tax, Fiscal policy and Fed policies, meaning further volatility for markets.
Major US stock indexes halted their longest rally in three years on Thursday as equities took a breather from their record highs. Trumps promise of a “massive” tax plan in the “not so distant future” was the main catalyst for the rally. However till we have further clarification of these proposals we may see traders become somewhat tentative to hold their positions here.
The dollar itself remains a little weaker on the week as it failed to rally on the back of some strong data, including Wednesday’s inflation number which hit a four year high of 2.5 percent.
Oil prices are trading slightly higher on the prospects of OPEC extending its oil supply-reduction pact with non-members, while talk of further cuts in production have also surfaced. Both Brent and WTI crude has traded within a +$5 per barrel price range so far this year, a further cut in production may see prices break out of this range.
In the UK, where we have voiced our concerns in the past about the health of the consumer. We saw consumer credit grow at its slowest pace for over two and a half years in Jan, while December’s Retail Sales figure also gave some concerns. Today’s retail figure also failed to live up to expectation, coming in at -0.3 percent vs +1 percent expectation. With inflation continuing to rise in the UK, and consumer sentiment clearing showing signs of weakness, the BoE now have the difficult task of juggling inflation, rates and growth!
As a result of this morning’s data, sterling has faced some renewed selling pressures since breaking out on the downside of this week’s ranges. Vesrus the US Dollar we’re now back at 1.2386 whilst against the euro we’re currently trading at a day’s high of .8581 (GBPEUR 1.1653)