Market wrap: dollar catches a bid on higher yeilds - Westpac

Analysts at Westpac explained that the US dollar bounced against major currencies in Friday NY trade, backed by higher yields.

Key Quotes:

"US data mostly leaned to the strong side, with Feb housing starts the one disappointment (-7% after +10% in Jan). Industrial production jumped 1.1%, including manufacturing +1.2%. March consumer sentiment (University of Michigan) easily beat consensus, reaching 102.0, a high since 2004. The Jan JOLTS survey of job openings was also strong, up to 6.31 million.

In a Reuters interview, ECB chief economist Peter Praet emphasised the slack in the Eurozone’s labour market as a dampening impact on inflation, as shown in the low Q4 labour costs. EUR/USD fell from 1.2335 to 1.2260, closing at 1.2290.

USD/JPY bounced off 105.60 to 106.20 before easing back to 105.90, still down over 24 hours. USD/CAD rose a modest 0.3% to 1.3090. Underperformer AUD extended a two-day decline from 0.7800 to 0.7710 – the lowest since Dec. NZD fell almost as far, from 0.7260 to 0.7208. AUD/NZD thus slipped under 1.0700.

The US 10yr treasury yield rose from 2.81% to 2.85%, while 2yr yields rose from 2.28% to 2.29% - the highest level since Sep 2008. Fed fund futures continued to price three more hikes by end-2018 (with a move this week effectively a done deal), and another hike in 2019.

Today's calendar is very light. The week's calendar highlights include Australia March labour force data and monetary policy decisions by the Fed, RBNZ and BoE."