No news is good news! The lack of updates on geopolitical risks or trade tensions kept U.S. traders in a good mood, lifting bond yields and the currency. Equity indices also closed higher as risk appetite was in play.
- Canada’s NHPI down by 0.2% vs. projected 0.1% uptick
- U.S. initial jobless claims down from 242K to 233K vs. 231K forecast
- U.S. import prices flat in March vs. estimated 0.2% uptick
- FOMC member Kashkari: Fiscal policy might boost inflation
- New Zealand Business NZ manufacturing index down from 53.3 to 52.2
Easing geopolitical risks
Market watchers were able to breathe a sigh of relief when the POTUS took to Twitter (What’s new?!) to backpedal on his tough talk on Syria.
Never said when an attack on Syria would take place. Could be very soon or not so soon at all! In any event, the United States, under my Administration, has done a great job of ridding the region of ISIS. Where is our “Thank you America?”
— Donald J. Trump (@realDonaldTrump) April 12, 2018
With that, risk appetite extended its stay from the earlier trading session, allowing stock indices to recover:
- Dow 30 index is up 239.60 points to 24,483.05 (+1.21%)
- S&P 500 index is up 21.80 points to 2,663.99 (+0.83%)
- Nasdaq is up 71.22 points to 7,140.25 (+1.01%)
U.S. bond yields surged, also partly due to positive expectations for the upcoming earnings season, while the dollar index managed to snap its four-day losing streak.
- U.S. 2-year yield is up to 2.344%
- U.S. 5-year yield is up to 2.655%
- U.S. 10-year yield is up to 2.821%
Gold also returned some of its recent gains while crude oil squeezed out a few more, as there are still talks of the U.S. military targeting eight sites in Syria. Bitcoin even ticked back above the $8,000 psychological mark.
Less dovish remarks from Kashkari
FOMC member Neel Kashkari is infamous for his typically downbeat remarks warning about the perils of weak inflation and tightening too quickly.
However, a slight shift in tone was noticeable in his recent speech, as he conceded that tax cuts and stimulus from government spending might actually boost inflation to the 2% target.
Still, Kashkari reiterated that he’s not seeing signs of wage growth nationally and that there’s still a degree of slack in the labor market. As for the tariffs spat with China, he mentioned that the U.S. should avoid a trade war at all costs and should instead encourage China to open more markets for U.S. businesses.
Major Market Mover(s):
The dollar was able to find a bit more solid footing thanks to a pickup in U.S. bond yields and cooling geopolitical tensions.
USD/JPY is up from 106.91 to a high of 107.43, USD/CHF recovered from .9609 to a high of .9647 before falling back to .9612, EUR/USD is down to the 1.2300 handle, but Cable held its ground to reach a high of 1.4247.
Sterling retained its lead for the rest of the day, boosted by positive remarks from Davis earlier on.
GBP/JPY is up from 151.50 to a high of 152.87, EUR/GBP is down to .8659, GBP/AUD continued to climb to 1.8340, GBP/CAD found support at 1.7850 and is up to 1.7921.
Watch Out For:
- 1:30 am GMT: RBA Financial Stability Review
- Tentative: Chinese trade balance (smaller surplus of 179B CNY from previous 225B CNY eyed)