Greenback and Yields Gained, Australian Dollar Subdued

Market Reviews

The greenback and Treasuries have risen. 10 year yield lifted 0.042 to 2.937. TNX is expected to align 3.000 handle. Aussie weakened due to RBA’s dovish policy stance. OCR remained at 1.50%.

Silvana Tenreyro, BoE MPC member claimed: “much of the downside Q1 GDP news is likely to be erratic”, suggesting: “possibility of some underlying weakness in demand”. Tenreyro said BoE will get a “significantly clearer picture of the underlying strength of domestic demand quite soon”. That’s why, no changes in Bank’s policy are planned. However, the MPC member noted: “while I anticipate that a few rate rises will be needed, the timing of those rate rises is an open question.”

International Monetary Fund reported that the 3% growth in prior year in Canada was the strongest among countries of the Great Seven. But, IMF warned about an abrupt correction in the housing market. The medium term impact of US tax cuts could make Canada a “less attractive destination for investment”. Problems with NAFTA renegotiation will also hurt the economy and return to WTO rules could chop GDP growth by -0.4%. The Fund advised Bank of Canada to tighten the policy moderately.

Japanese household spending fell -1.3% yoy in April. Chinese Caixin PMI services remained at 52.9 in May. Australian current account deficit reduced to -10.5 billion Aussie in the first quarter. British BRC retail sales monitor increased 2.8% yoy in May. Today, UK releases PMI services, Eurozone presents PMI services, US announces ISM non-manufacturing and Canada issues labor productivity.