The dollar weakened and Treasury yields ticked lower on expectations slowing US inflation will erode the case for more rate hikes.
(Bloomberg) — The dollar weakened and Treasury yields ticked lower on expectations slowing US inflation will erode the case for more rate hikes.
A dollar gauge dropped to the lowest since April as traders focus on US consumer price data due later Wednesday, with a Bloomberg survey showing expectations for both core and headline inflation continuing to moderate in the face of the Federal Reserve’s monetary policy onslaught. That slowdown has given support to risk appetite and damped demand for the greenback.
“Investors await for US CPI and PPI data and any confirmation of slowdown in inflationary pressure will probably accelerate the current trend of declines in the dollar,” said Takeshi Ishida, currency strategist at Resona Bank.
The Stoxx Europe 600 index edged higher for a fourth day, led by technology and mining stocks. Futures on the S&P 500 and Nasdaq 100 were steady after Tuesday’s solid gains.
Across Asia, shares were a mixed bag, with slides in Japan and increases in Australia and India. Hong Kong stocks rose after data showed a strong credit expansion in the world’s second-largest economy. Chinese tech firms gained for a third day as unusual praise from the nation’s top economic planner and news of a meeting between officials and key companies stoked optimism over policy support for the sector.
In contrast to the gains in Hong Kong, China’s domestic benchmark CSI 300 index shed 0.4%, an indication that local investors would like to see stronger stimulus to salvage an ailing economy.
Also in the spotlight is the yen’s advancement beyond the key 140 level partly on speculation that the Bank of Japan will tweak policy later this month.
Elsewhere, the offshore yuan gained for a fifth day against the greenback, after China’s central bank extended support for the currency via a stronger-than-expected daily reference exchange rate.
The kiwi dollar strengthened after initially paring gains on the Reserve Bank of New Zealand’s decision to keep interest rates unchanged for the first time in almost two years. The nation’s sovereign bond yields declined.
In commodities, oil steadied Wednesday after rising amid indications that Russian crude production is dropping, signaling the market’s supply glut may be coming to an end. Gold rose.
Key events this week:
- Canada rate decision, Wednesday
- Bank of England Governor Andrew Bailey speaks, Wednesday
- US CPI, Wednesday
- Federal Reserve issues Beige Book, Wednesday
- Fed speakers include Neel Kashkari, Loretta Mester, Raphael Bostic, Wednesday
- China trade, Thursday
- Eurozone industrial production, Thursday
- US initial jobless claims, PPI, Thursday
- US University of Michigan consumer sentiment, Friday
- US banks kick off earnings, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.2% as of 8:09 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index rose 0.5%
- The MSCI Emerging Markets Index rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.1% to $1.1023
- The Japanese yen rose 0.6% to 139.55 per dollar
- The offshore yuan rose 0.2% to 7.1979 per dollar
- The British pound was little changed at $1.2939
Cryptocurrencies
- Bitcoin rose 0.5% to $30,729.07
- Ether rose 0.9% to $1,889.92
Bonds
- The yield on 10-year Treasuries declined three basis points to 3.94%
- Germany’s 10-year yield was little changed at 2.65%
- Britain’s 10-year yield declined four basis points to 4.62%
Commodities
- Brent crude fell 0.1% to $79.29 a barrel
- Spot gold rose 0.1% to $1,934.43 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess.
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