Intraday Market Thoughts

USD Shines on The Allure of Yield

by Adam Button
Jun 9, 2014 23:18

The post-ECB bounce is looking more like a squeeze on shorts as better Treasury yields hurt EUR/USD. The pair fell 40 pips Monday as the US dollar gained broadly. China CPI is due up later after a surprise selective cut in the RRR.  Both Premium trades in EURUSD were filled and remain in progress, as is the long in USDCHF, with all details and 3 related charts found in the latest Premium Insights.

US 10-year Treasury yields rose to 2.62% on Monday as positive risk momentum continued in light trading. The main loser was the euro as a good portion of the post-ECB bounce faded. The yield on the T-note is nearly double the German equivalent and that will push anyone who has the option into much better paying Treasuries.

EUR/USD sank below 1.3600 but held in the 1.3585 zone that proved so sticky in the run-up to the ECB.

The data highlight was Canadian housing starts at a robust 198K compared to 185K expected. Better weather spurred  construction but Canadian housing bears are once again feeling discouraged. USD/CAD slipped down to 1.09 and the downside was pressed by a $1.86 jump in oil up to $104.38. The $105 zone for WTI crude has proved challenging and bears watching.

Looking ahead, several low key AUD and NZD indicators are on the schedule but they will be trumped by Chinese CPI at 0130 GMT. The consensus is for a 2.4% y/y rise which is a sharp step up from the 1.8% y/y rise last month.

In any event, the RRR cut to agriculture and small businesses shows that officials aren't overly concerned about inflation. 

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.
  • EUR -33K vs -16K prior
  • JPY -74K vs -59K prior
  • GBP +35K vs +35K prior
  • AUD +22K vs +16K prior
  • CAD -23K vs -22K prior
  • CHF -2K vs -4K prior
  • NZD +18K vs +18K prior 

Act Exp Prev GMT
Consumer Prce Index (MAY) (m/m)
-0.1% -0.3% Jun 10 1:30
Consumer Prce Index (MAY) (y/y)
2.4% 1.8% Jun 10 1:30

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