Dollar Trades Mixed as U.S Treasury Yields Rise
The United States (U.S) dollar was mixed against its major trading partners early Monday ahead of a relatively light data schedule while Treasury yields inched upward. Market data shows that U.S Treasury yields rose on Monday as orders for capital and durable goods in May increased more than expected while pending home sales surprised to the upside from the previous month as the U.S. economy showed strength before a big interest rate hike.
The yield on the benchmark 10-year note rose 4.6 basis points to 3.170% and the two-year’s yield, which typically heralds rate expectations, gained 2.2 basis points to 3.079%. Durable goods order data for May are scheduled for release today, followed by pending home sales data from the Dallas Federal Reserve’s manufacturing index for June.
Data highlights for the week include consumer confidence on Tuesday, gross domestic product growth on Wednesday, personal income spending on Thursday and ISM manufacturing on Friday before another long holiday weekend.
Federal Reserve Chairman Jerome Powell’s testimony last week, as well as other Fed official appearances, served to confirm market expectations that the Fed will continue to push rates higher to fight inflation, with a further 75-basis point increase at the July meeting being priced in by markets.
G-7 leaders continue their summit in Germany on Monday, where capping prices of oil imports is expected to be discussed. A quick summary of foreign exchange activity heading into Monday indicates that USDEUR rose to 1.0587 from 1.0555 at the Friday US close and 1.0541 at the same point Friday morning. There were no EU level data scheduled for release Monday.
The data highlights of the week will be EU unemployment on Thursday and inflation on Friday. The European Central Bank’s monetary policy committee meets next on July 21 when it is expected to begin its tightening cycle.
GBPUSD slipped modestly to 1.2270 from 1.2276 at the Friday US close and 1.2303 at the same time Friday morning. There are no UK data scheduled for release Monday. UK GDP will be released on Thursday. The Bank of England is expected to maintain its tightening cycle to tamp down inflation after a 25-basis point increase at the last meeting.
USDCAD slipped to 1.2889 from 1.2919 at the Friday US close and 1.2968 at the same point Friday morning. There are no Canadian data scheduled for release Monday. Canada’s GDP will be released on Thursday. Markets anticipate further monetary policy tightening at the Bank of Canada’s July 13 meeting after June’s 50 basis point increase.
USDJPY ticked up to 135.297 from 135.164 at the Friday U.S close and 135.085 at the same point Friday morning. Japanese leading indicators data released overnight rose for the fourth straight month. READ: Dollar Trades Mixed Ahead of Fed Minutes Release
The Bank of Japan has insisted that above-target inflation is temporary and that monetary policy will remain accommodative as a result. #Dollar Trades Mixed as U.S Treasury Yields Rise