In the US, retail sales disappointed for the fifth straight month while on a month- on-month basis headline retail sales were flat over March. US import prices contracted for the 10th continuous month, which is emanating from the strong US dollar, which is also importing deflation into the US. With benign or no inflation pressure, the FOMC will be under lesser pressure to move on hiking rates. The US dollar weakened across the board sending the euro, GBP, Canadian dollar and some other currencies surging higher. The biggest gainers were the precious metals group, with gold up more than two per cent. Slower growth means that the data-dependent FOMC will have to hold off the rate hike for some time more and the prospects of lower rates for a longer period sent precious metal prices zooming higher. Silver prices also rallied closing at its highest level since mid-February. Bond market differentials kept the US dollar weak again with German Treasury yields heading a few bps higher and US Dollar Treasury yields inching lower.

Sterling

The weakness in US dollar sent the sterling pound to highs not traded since November last year. The pound is now up 8.6 per cent from the low it traded April 13 against the US dollar. The move was a combination of better than expected data in UK and weak US retail sales data which was another weak data point. The FOMC members continue to talk about a June-September rate hike but the market does not seem to be convinced with only employment data holding up. The pound Sterling will be driven by the strength or weakness in the US dollars over the next few days, with elections out of the way and no data releases scheduled till middle of next week when we have inflation data both at the Producer and Consumer level and the Bank of England meeting.

Euro

The euro also benefited from the weakness in the US dollar and surged to highs not traded since middle of February. German Bund yields continued to trade in a volatile range and tested intraday lows before resuming its upward march. The surge higher in European Bond yields as compared to US Treasury yields is supporting the rally in the Euro. The surge in European bond yields has resulted in most sovereign yields trading in positive range in the five-year bucket.

US dollar

The US dollar index traded a low of 93.133 which is the lowest since 22nd of January this year. The main driver of this US dollar move has been weak US economic data. The first estimate of Q1 GDP was at 0.2 per cent and after the massive trade deficit posted for March due to sharp upsurge in imports we could see this number being revised lower to show n

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