- S&P Global February flash services PMI 50.5 vs 47.2 expected
- Canada January CPI 5.9% y/y vs 6.1% y/y expected
- Canada December retail sales 0.5% versus 0.5% expected
- US January existing home sales 4.00M versus 4.10M estimate
- US treasury auctions off $42 billion of two-year notes at a high yield of 4.673%
- Lagarde repeats that the ECB intends to hike 50 bps in March
- ECB's Lagarde: Not seen wage price spiral in the euro zone
- What's happening in the global economy, according to Wal-Mart
Markets:
- Gold down $6 to $1834
- US 10-year yields up 13 bps to 3.95%
- WTI crude oil down 29-cents to $76.16
- S&P 500 down 2.0%
- GBP leads, AUD lags
The market came into the day in a bad mood as the US long weekend didn't temper worries about inflation. Those fears appeared well-founded when the US PMI from S&P Global ran hot on the services side. You don't see many people raving about a recession anymore and the bond market helped to signal the 'all-clear' with a rise above 3.9% in 10s. The dollar followed that move and stocks crumbled.
At 10:30 am NY time, there was a quick selloff in the US dollar and it's still not entirely clear why. It was early for fixing flows but in the absence of any other kind of explanation, that's what we've got.
Geopolitical worries and corporate caution from WMT and HD may have added to the negative mood as well. In any case, the dollar is bordering on fresh breakouts on a number of fronts.
Turning north, Canadian CPI was a welcome sign for the Bank of Canada as inflation undershot expectations and took the pressure of Macklem to deliver a surprise hike on March 8. Central banks would love to have a few months of data to get a real handle on whether seasonals, weather, one-off and other factors are impacting the numbers. In addition, they want to see monetary lags unfold before they're forced into getting back into the inflation-fighting trenches.
USD/CAD rose on the headlines and then continued to rise throughout the day as the mood soured. Eventually, last week's high gave way and the pair touched 1.3549, which is the highest since Jan 5.
