Forexlive Americas FX news wrap: ECB turns hawkish, US retail sales disappoint | Forexlive
Markets:
- Gold down $30 to $1770
- WTI crude oil down $1.10 to $76.18
- US 10-year yields down 5.7 bps to 3.44%
- Italian 10-year yields up 29 bps to 4.18%
- S&P 500 down 99 points to 3898
- USD leads, AUD lags
Hopes for a dovish turn from global central bankers proved premature and the ECB absolutely hammered the point home. Lagarde delivered 50 bps and relentlessly hawkish commentary. The usual leaks show it was close to 75 bps and that another 50 bps is likely coming at the next meeting. Economists now see them going as high as 3.75% and the revisions are just beginning.
In the US, the army of doubters regarding long-term +5% rates got some help today with US retail sales disappointing on all metrics but instead of strengthening resolve in a pivot, it added to worries about a hard landing. US equities were battered and Treasuries bid. Some of that is coming through the European channel and it will take some time to sort out.
The euro rallied initially but then gave it all back and more in a sign that economic worries are outweighing positive carry. The high was 1.0735 in EUR/USD before it fell back to 1.0621 late.
That turn was part of a broad USD rally that charged ahead particularly strongly against AUD, GBP and JPY. What’s interesting is that the dollar is signaling a more-hawkish Fed and poorer growth but the Fed funds futures market isn’t. That’s something we’ll be watching closely.
USD/JPY traced out a three-candle reversal, though a close above 137.97 now looks unlikely. That was just one of a handful of big reversals from the recent highs on USD charts.