The euro fell to its lowest since mid-January at $1.211 after the European Central Bank announced its decision to keep monetary policy unchanged. The single currency had initially rebounded after Draghi played down concern over recent softness in data, but fell as the market digested the news and the U.S. dollar rallied.
The U.S. dollar continued its eight-day rally, rising to 91.637, its highest since Jan. 12, against a basket of six currencies.
Against the yen, the dollar set a 2-1/2-month high of 109.46 yen but later eased to 109.32 yen.
· Now that the 10-year Treasury yield has topped 3 percent for the first time in four years, the bigger test is still ahead. The 10-year yield on Wednesday reached its highest since January 2014, at 3.035 percent.
For the next move higher, traders are watching a level just below 3.05, where the 10-year topped out in January 2014. The 3 percent level is a psychological milestone, a wake-up call that interest rates are going higher.
The sense is that if the 3.05 percent level is broken easily, rates could move up quickly, and then the 3.20/3.25 percent level that some strategists have set as a year-end target could come into play much sooner.
· Boris Rjavinski, senior rate strategist at Wells Fargo, said he expects to see the 10-year reach 3.05/3.10 by the end of the quarter, and then 3.20 percent by year-end.
Other financial markets could also drive the direction, including stocks that could pull yields lower if equities continue to sell off. Yields move opposite price.
"It's not only equities. Keep an eye on crude. Oil prices have been known to influence Treasury yields. ... As crude moves around, so do inflation expectations," said Rjavinski.
He said two near-term economic reports could impact rates. One is first-quarter GDP on Friday, and the other is the PCE deflator, being reported Monday with personal spending data. The PCE is the preferred inflation measure of the Fed. Rjavinski said economists expect it to reach 2 percent on core inflation when released on Monday. The Fed's inflation target is 2 percent.
The Fed also meets next week, but at this point is not expected to raise interest rates. Still, it's post-meeting statement could also be something that triggers a move in rates.
· Mario Draghi, European Central Bank president, acknowledged a “moderation” in the pace of the eurozone recovery, but signalled no change in monetary policy.
Speaking on Thursday after a meeting of the ECB’s governing council that kept in place the bank’s promise to maintain its asset purchase programme at least until the end of September, Mr Draghi said there had been “a loss of momentum that is pretty broad based across countries and all sectors”.
But he added that his overall assessment was one of “caution tempered by an unchanged confidence” of moving towards the ECB’s inflation target of just below 2 per cent.
Analysts said that Mr Draghi’s guarded language suggested that the ECB may wait until July — a month later than previously expected — to provide the markets with updated “forward guidance” on its plans to phase out the crisis-era stimulus.
· Japan’s central bank is set to keep monetary policy steady on Friday and project inflation to hit its target next fiscal year, signaling that its next move could be to dial back its huge stimulus albeit at a much slower pace than its global peers.
· New orders for key U.S.-made capital goods unexpectedly fell in March, weighed down by the biggest drop in demand for machinery in nearly two years, and a decline in shipments suggested business spending on equipment slowed in the first quarter.
Orders for long-lasting or “durable” goods jumped 2.6% in March, riding a big increase in contracts for Boeing planes. Yet orders were flat minus transportation and business investment fell for the third time in four months
The Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, slipped 0.1 percent last month. Data for February was revised to show these so-called core capital goods increasing 0.9 percent instead of the previously reported 1.4 percent jump.
New applications for U.S. unemployment benefits dropped to their lowest level in more than 48 years last week, suggesting that March's slowdown in job growth was probably temporary. ous week.
Initial claims for state unemployment benefits fell 24,000 to a seasonally adjusted 209,000 for the week ended April 21, the lowest level since December 1969, the Labor Department said on Thursday. Data for the prior week was revised to show 1,000 more applications received than previously reported.
· Slowing first-quarter growth
According to a Reuters survey of economists, GDP growth likely slowed to a 2.0 percent annualized rate in the first three months of the year. The economy grew at a 2.9 percent pace in the fourth quarter. The government will publish its advance estimate of first-quarter GDP on Friday.
· Smiling and holding hands, North Korean leader Kim Jong Un and South Korean President Moon Jae-in met at the heavily fortified demilitarized zone between the countries on Friday in the first summit for the two Koreas in over a decade.
The meeting, aimed at ending their decades-long conflict and easing tensions over the North’s nuclear weapons program, comes weeks before Kim is due to meet U.S. President Donald Trump.
U.S. President Donald Trump on Thursday said he is considering three or four dates as well as five locations for his meeting with North Korean leader Kim Jong Un, adding that it remains unclear whether the meeting will occur.
Trump, speaking in an interview on Fox News Channel, said that then Secretary of State-designate and CIA chief Mike Pompeo’s meeting with Kim in North Korea over the Easter weekend a few weeks ago was unplanned.
· Senior Trump administration officials will push China to address a wide range of trade irritants when they visit the Asian nation in coming days, a top economic adviser to the president said.
“It’s going to cover a broad area. All of the disputes will be discussed,” Larry Kudlow, director of the White House’s National Economic Council, said in an interview Thursday with CNBC. Kudlow said he will join a delegation that’s expected to include Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer.
· U.S. President Donald Trump will travel to Britain in July for a working visit with Prime Minister Theresa May, after months of back-and-forth over when the U.S. president would visit what traditionally has been the United States’ closest ally.
Representatives for the White House and 10 Downing Street said Trump would visit the United Kingdom on July 13 and hold bilateral talks with May but gave no other details.
It was also not immediately clear how long Trump would stay on his visit, which would come more than a year after taking office.
· The European Commission believes U.S. President Donald Trump is setting unacceptable conditions for the European Union to get a permanent exemption from steel and aluminum tariffs, a German newspaper reported on Thursday.
The newspaper said the Commission had rejected the demands as unacceptable.
German Chancellor Angela Merkel is due to hold talks on trade with Trump in Washington on Friday. A senior German government official said on Thursday that Germany expected U.S. tariffs on European steel and aluminum products to kick in on May 1.
· Euro zone finance ministers will start discussions on Friday on Greece’s exit from eight years of international bailouts, focusing on how Athens wants to boost economic growth and finish the last reforms agreed with its creditors, officials said.
· Oil prices gained on Thursday as the risk of renewed U.S. sanctions on Iran, plunging Venezuelan output, and robust global demand shook off the effects of a strong dollar.
Global benchmark Brent crude futures LCOc1 gained 74 cents to settle at $74.74 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 were up 14 cents to $68.19 a barrel.
Reference: Reuters, CNBC, Market Watch, Bloomberg, Financial Times
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