Headlines

* Australia’s surprise jump in unemployment boosts pressure on RBA

* US retail sales jump in latest sign Fed may need to keep rates high

* ECB’s Lagarde reaffirms intention for half-point March hike

* Bitcoin jumps to highest since August as regulatory concern ebbs

FX: USD advanced to its highest since 6 January at 104.11 before marginally paring losses. This followed strong-than-expected US retail sales. But the index closed at 103.81 and is back in the resistance zone today. The benchmark US Treasury 10-year yield jumped up to 3.82% before paring gains. Only the high at 3.84% on the first trading of the year has beaten this level. Two-year yields hit highs not seen since November.

EUR has reclaimed the 1.07 handle amid the softer dollar this morning. ECB President Lagarde reaffirmed guidance for a 50bp hike next month and a commitment to returning inflation to target. GBP gradually extended on the mild rebound from a floor around 1.20. Soft UK CPI had seen selling and GBP underperformance. USD/JPY recoiled from the 134 handle on softer yields. AUD looks supported by its 50-day SMA and a Fib level just below 0.69.  

Stocks: US equities oscillated, clawing back initial weakness and finishing in the green.The S&P 500 finished 0.3% higher after flipping between gains and losses. The tech-heavy Nasdaq rose 0.77%. It had fallen as much as 1.1% in the morning. The Dow underperformed. But it rallied 250 points off its low and closed higher by 0.11%. The mid-August resistance level at 34,281 is proving tough to beat.

Asian stocks gained as the positive Wall Street handover boosted sentiment. The ASX 200 was former after several key earnings releases. But gains were capped by disappointing jobs data. The Nikkei 225 was led by strength in autos. Data was varied with machinery orders softer than expected and trade data mixed.

US equity futures are marginally in positive territory. European equity futures are strong. The Dax has opened up nearly 0.5% higher. The FTSE 100 has risen above 8,000.  

Gold has lost its 50-day SMA at $1860 which now becomes resistance. Prices fell to $1830 with yields and the dollar still relatively solid. $1892 is the 38.2% retracement level of the rally off the November lows. Below here is the $1809 area which was broken in the move higher.   

Data Breakdown – More positive US data

Another day, another upbeat data point out of the US. Wednesday saw much better retail sales with core activity rising by 2.6%. While warm weather likely contributed to the upside surprise, sales recovered broadly across all main sectors. This is consistent with the earlier positive signals from leading indicators.

“No landing” and “wot recession?” are being touted by some economists. The better data has prompted a sharp rise in yields. In some ways, the dollar should be trading higher too. But the slightly improved risk mood is holding the buck back. Markets are currently presuming the better activity data will lead to better earnings. Higher rates are being ignored while funds contemplate their still underweight positioning in equities.

Chart of the Day – EUR/USD holding onto the 50-day SMA

ECB officials continue to manage rate hike expectations. The rhetoric is for more tightening with Lagarde confirming yesterday a 50bp move in March. It seems the bank is not done raising rates after that meeting either, as price pressures remain high. The ECB terminal rate is above 3.5% though the absolute advantage in rate expectations remains firmly with the USD.

EUR/USD popped up to 1.1032 as the US disinflation story accelerated and on China reopening. But the major sank for five straight days with bumper US jobs data to the fore. Prices are now trading around the 50-day SMA at 1.0721 in a relatively tight range. If sellers get through the 1.0660 area and a Fib level above 1.06, 1.05 looks on the cards fairly quickly.