Market wrap: greenback steals the show - Westpac

Analysts at Westpac explained that the US dollar had tracked higher in Sydney trade Tuesday, with emerging market currencies under particular pressure, adding that this continued in London and NY, with the greenback’s gains extending on US data.

Key Quotes:

"US retail sales posted moderate gains in April but upward revisions to March and February portray stronger consumer trends over recent months. Headline retail sales rose 0.3% in April, matching estimates while March was bumped up to +0.8%, from 0.6% and February shows a flat outcome, from -0.1%. The retail control group, a subset of sales that guides GDP calculations, posted a 0.4% gain in April, in line with expectations and the previous month was revised to a show a firmer 0.5% gain, from 0.4%."

"The first of the May business surveys maintained a healthy track, the NY Fed Empire survey for May coming in at an elevated 20 (consensus 15.0), new orders, prices paid and employment all firmed. Homebuilder optimism held at recent highs too, the NAHB housing market index coming in at 70 in May (consensus 69)."

"There was very wide market interest in the US 10yr treasury yield which rose from 3.00% to 3.09% - the highest since July 2011 - finally breaking through the Jan 2014 highs around 3.03%. Two year yields rose from 2.55% to 2.59%. Fed fund futures yields continued to predict a rate hike in June, plus one more by year end and <50% chance of another."

"EUR/USD started to slide before the US data, extending to 1.1820, testing lows since Dec. ZEW May surveys for Germany and Eurozone proved to be pretty much in line with expectations, halting the spate of undershooting expectations. The pause in the retracement from end year highs is welcome, but the expectations components still suggest a slip in activity towards 2016 levels of growth."

"USD/JPY rose from 109.80 to 110.45, a high since February. AUD/USD fell from 0.7520 to 0.7448 then trimmed losses. NZD fell from 0.6920 to 0.6854 – the lowest since Dec 2017. AUD/NZD preserved recent gains, ranging between 1.0855 and 1.0900."

"GBP/USD fell as much as 1 cent amid the sharpest US$ gains, but steadied down 50 pips, around 1.3500. UK data was not to blame – the employment report (unemployment of 4.2%, ave. earnings +2.9% ex-bonus) was broadly in line with expectations and so showed a further welcome return to positive real wage growth."

"The other positive was a larger than expected 3m/3m increase in employment (197k vs exp. 125k) with the employment rate (75.6%) hitting a record high."