Third time is the charm it would seem, as risk sentiment finally relented in US trading yesterday. We have three days of US data and while the importance of the events might have slowly dwindled, the reaction in markets was quite the opposite. On Tuesday and Wednesday, US stocks opened lower before clawing back those losses. It looked to be a repeat episode yesterday before all things went to hell in the final hour and a half.
Are the cracks finally showing up and is this what breaks for the overall risk mood? We'll have to see by the end of today to confirm that. But in the aftermath of the retreat yesterday, S&P 500 futures are down another 18 points, or 0.4%, currently.
In turn, the dollar strengthened and is finally looking to run up against key technical levels (I'll detail more as we get into the session) with USD/JPY especially on approach towards 135.00 as 10-year Treasury yields close in on the December highs around 3.90%. The greenback is seeing gains extend so far today amid the softer risk mood in markets ahead of European trading.
I mentioned after the US CPI data that this is a complicated period in markets but in the short-term, the supposed "6% trade" may win out. That seems to be the case and the way I'd like to think about it is, who in markets doesn't like a squeeze when they can get away with it?
