Dollar jumps after U.S. retail data fuels rate hike bets

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LONDON (Businesshala) – The dollar jumped on Wednesday as strong US retail sales data raised bets on a hike in Federal Reserve interest rates, as well as the pound after UK inflation hit a ten-year high.

File photo: Euro, Hong Kong dollar, US dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this illustration on January 21, 2016. Businesshala/Jason Lee/Illustration/File photo

The dollar rose to its highest level against the Japanese yen since March 2017, as US data on Tuesday showed stronger than expected retail sales last month.

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With inflation running high, the data boosted expectations of a rate hike by mid-2022. Investors also think the data could encourage the Fed to accelerate its asset purchase program.

“We’re finally at a place where it looks like growth is still pretty strong,” said Mike Bell, global market strategist at JPMorgan Asset Management. “The Fed is going to lower before the Fed raises rates, and I think that’s backing the dollar.”

The greenback rose to 114.98 yen before turning flat at 114.77 with the euro falling for the first time since July 2020.

The dollar index – which measures the currency against six rivals – climbed to 96.26, its highest level since last July. Its strength weighed on the US Treasury, with the benchmark 10-year note yield reaching a three-week high of 1.649% in Asian trading hours. [US/]

Equity markets took hold. The broader euro STOXX 600 was on course for a sixth day of gains and rose 0.2% near record highs.

German medical tech firm Siemens Healthiniers gained up to 5.5% after raising synergy targets from its purchase of US peer Varian earlier this year.

Yet British shares fell 0.2% against the euro, hitting a 10-year high against the euro after hitting a 10-year high, betting on the Bank of England’s rate hike.

Against the US Dollar, sterling rose 0.3% to $1.3480, its highest level since November 10. Analysts said the BoE will likely hike rates, after surprising investors last month by keeping policy stable.

Analysts at MUFG wrote, “There is no chance of any reversal of expectations once the inflation data is released.” “Some well-telegraphed factors helped push inflation higher … we don’t think the data turns the dial much in terms of BOE response.”

$1 trillion inflow

Global equities have seen nearly $1 trillion in inflows during the past 51 weeks, Goldman Sachs said in a note, as positive news emerged on coronavirus vaccines, adding that this year already quadrupled the previous best year’s inflows. has been seen.

The strategists said, “The understandable increasing attraction of real assets (which provide some hedge against inflation) is pushing up equity index levels and pushing investors negatively to move away from cash and bonds. “

The MSCI World Equity Index, which tracks stocks in 50 countries, fell 0.1%.

Wall Street equity futures gauges were flat.

Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3% from Tuesday’s three-week high, and was set for its biggest fall of the month, with a seven-day high. There was profit.

US President Joe Biden and Chinese leader Xi Jinping shrugged off some heat in Sino-US tensions in talks on Tuesday, though both sides strengthened their positions on a range of issues.

A positive trend gave a slight but brief boost to Asian stocks. “The Biden-Xi summit “had the potential to do harm, but it doesn’t seem to be the case,” said Rob Carnell, head of research for Asia Pacific at ING.

US gasoline inventories fell more than expected last week after plunging oil prices increased pressure on US officials to release oil from emergency reserves.

US crude fell 0.6% to $80.27 a barrel. Brent crude fell 0.5% to $81.96 a barrel. [O/R]

Reporting by Tom Wilson in London and Alun John in Hong Kong; Editing by Simon Cameron-Moore and Bernadette Baum

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