Morning all.. Wall St closed mixed on Friday with S&P down 0.14% but the Dow up 0.21% but the bond market was shut so the session lacked some direction. However US bond futures resumed trading last night and they went straight down taking the US 10yr yield up to 2.21% a new recent high and this took the dollar higher again. The higher USDJPY helping the Nikkei to close up 1.7% but stress was seen in some emerging markets again as popular carry trades were cut as US long end yields rose. The attraction of high yields in the EM space is waning as the US yields rise. The overnight session saw another leg of USD strength, driven mostly by a selloff in Fixed Income as markets expect President Elect Donald Trump will increase fiscal spending to boost growth. As a result, US 30Y creeped above 3.0% for the first time since January and the DXY continued to rally, up 50bps on the session and just below 99.60 as we speak. The JPY underperformed G10 pairs today, as Governor Kuroda warned “disorderly currency moves will negatively affect the stability of economy and financial markets.” The pair broke above the 107 and is up 84 ticks to 107.60 (107.65 the high), close to the intraday highs of 107.64. JPY-crosses were also bid, with EURPJPY up 25bps, GBPJPY up 45bps and AUDJPY outperformed, edging up 85 ticks to 81.19.
In Antipodeans, an earthquake in New Zealand sent NZD below the 0.71 level and the pair is now finding support around the 0.7180 – 0.7185 levels with Prime Minister John Key declaring that it would be “hard to believe damage would be less than a couple of billion dollars”. Price action elsewhere was mixed, with AUD tumbling to a 0.7525 low on China IP (6.1% yoy vs. 6.2% expected) miss before pairing losses as China Iron ore futures added 4%.
China data was mixed last night but Japan GDP was a beat. (Japan Q3 GDP: 0.5% q/q vs 0.2% cons; 2.2% y/y vs 0.9% cons). USDJPY managed finally to eat through the exporter offers at 107.00 and rushed to 107.65. There are no major central bank policy decisions this week but there is a plethora of Fed speakers (13 in total), with Fed Chair Yellen’s testimony before the Joint Economic Committee in Washington Thursday the banner event. A busy week for data kicks off with EZ IP for September (f/c -1.0% m/m vs +1.6% before). The main event Tuesday will be US October retail sales.. Good luck