Sharp rise in interest rates and fall in the US dollar

Almost all the activity indicators published yesterday surprised on the upside, which supported risky assets and caused a sharp decline in the US dollar, in the wake, let us recall, of good news from China. But they also reinforced expectations of monetary tightening and led to a rise in bond yields (the US 10 year is close to 3% again). In the US, retail sales rose by 0.9% over the month in April after +1.4% in March. Industrial production increased by 1.1% after +0.9% in March, while inventories rose by 2%. Eurozone GDP growth was revised up from +0.2% to +0.3% in Q1, with no change to the initial estimates for the major countries. The event came from Klaas Knot, the ECB’s Dutch central banker, who for the first time mentioned the hypothesis of a 50bp hike in key rates (in one go). This statement reinforced the rise of the euro against the USD, with the exchange rate touching 1.0564. The euro also partially erased its initial losses against the British pound after the release of UK employment figures that were well above expectations. The pound did not bounce back this morning after UK inflation figures rose sharply (9% after 7% yoy in April) but slightly less than expected. The EUR/GBP exchange rate is around 0.8450.

Japan’s GDP declined in Q1 but less than expected (-0.2% qoq vs. a consensus of -0.4% qoq) thanks to a good resistance of domestic demand to anti-Covid measures. The yen seems to be stabilising below 130 against the USD after its sharp fall of the last 2 months. The sharp decline in the NAHB construction index (the 5th in a row) in the US was little noted but reflects the dual impact of rising credit rates and higher material costs and foreshadows a downturn in the housing market. Housing starts and building permits are expected to fall today for the month of April. This will be the main economic report of the day with the revision of the Eurozone inflation figures.

Share this news :
Share on twitter
Share on linkedin
Share on email

You might also read :

March 2, 2021

EUAs retreated after a bullish opening

As expected, the European power spot prices continued to rise yesterday, lifted by forecasts of weaker wind output and French nuclear availability. Prices reached 53.30€/MWh…
July 30, 2021

EUAs posted slight daily gains

The European power spot prices were mixed yesterday, decreasing in France (-5.99€/MWh day-on-day) on expectations of weaker demand but sharply rising in Germany (+18.71€/MWh), Belgium…
February 25, 2021

Rather say it twice than once

Optimism was back with a vengeance on markets yesterday and the trend was confirmed in Asia overnight: stocks on the rise despite bond yields reaching…
Join EnergyScan

Get more analysis and data with our Premium subscription

Ask for a free trial here

Don’t have an account yet?  Sign up here!