Entering into US session, CAD, EUR and GBP are trading as the strongest ones, while USD, AUD and JPY are the strongest. Some note that USD is the strongest one. Yes, admitted it is. But considering the USD/JPY is lacking follow through buying through 109.50, and AUD/USD is also held in tight range, it should be more about the weaknest of CAD, EUR and GBP, rather than strength of USD.
CAD is clearly weighed down by falling oil price as WTI drops below 70 handle on talk that OPEC and Russia are going to raise production. USD/CAD would soon be retesting 1.2996 resstance.
Meanwihle, we believe that the free falls in German and UK yields are the reasons dragging EUR and GBP down. Data from both countries together are not bad and won’t add to more dovish ECB or BoE expectation.
Instead, we’ve noticed that Italian 10 year yield has another day of strong rally today to 2.481, up 0.081 at the time of writing. German 10 year bund yield is down -0.048 at 0.426. The Italy-German yield spread surpassed 200 pts level for the first time since last June. The decline in German bund yield is particularly serious if we consider that it it as high as 0.583 earlier this week. Concerns over the new Italian government is the driving force in the markets.
UK 10 year gilt yields also dropped -0.50 to 1.351 so far.
