US bond yield inverts


Treasury yields pulled back from 15-month lows as investors reassessed the risks of a sharper downturn in the global economy. When the 10-year yield is lower than the three-year yield, it tends to signal that people are locking up money longer term because they fear a slowdown in business profits and its accompanying decline in stock prices. This warning signal has a fairly accurate track record and may mean a recession could be due in around 12 months. Such an inversion has preceded each of the last seven recessions.

The Dollar came under pressure last Wednesday following the FOMC policy decision where the updated projections showed policymakers no longer expect to raise interest rates this year.

Looking ahead, data releases due this week include housing starts, permits and consumer confidence today, trade figures tomorrow and GDP on Thursday.


Last night MP’s voted by 329 to 302 to take control of the Brexit timetable and test indicative votes to Theresa Mays withdrawal bill. MP’s will now vote on a variety of Brexit options tomorrow, giving parliament a chance to indicate whether it can agree a deal with closer ties to the European Union, although the Prime Minister has said there is no guarantee she will abide by their wishes nor implement whatever is agreed. Options could include –

• Mays Deal
• No-deal Brexit
• Second Referendum
• Revoking Article 50
• Free trade agreement with a customs union
• Remaining in the single market

Mortgage approvals out this morning came in 4k below expectations at 35,299. No data releases of note for the remainder of the week.


The Euro nosedived last Friday following a dismal German manufacturing PMI print which unsurprisingly had a knock on effect to the Euro Zone reading. ECB President Mario Draghi also reportedly described a downbeat view of the Euro Zone economy when he spoke to EU leaders.

Looking ahead, data releases due this week include Euro Zone confidence indicators and German CPI on Thursday followed by Euro Zone CPI and German retail sales on Friday.


The Swiss Franc finished the week firmly on the front foot with EUR/CHF accelerating down towards 1.12. There was little reaction to the Swiss National Bank who stood pat on policy with demand for the Franc seemingly prompted by safe-haven demand as risk sentiment was rocked on Friday by soft German and US PMI data.

The Swiss National Bank’s Maechler speaks on Thursday followed by the KOF leading indicator on Friday.


AUD/USD briefly rose above 0.7150 last week but lost momentum heading into the weekend after downbeat comments from US President Trump on trade prospects with China.

Employment data provided brief support meanwhile, but PMI figures released on Friday were soft.


The New Zealand Dollar hit its highest level since the start of February on Thursday following mixed GDP data although gains were capped by downbeat comments from US President Trump on trade prospects with China.

The RBNZ policy decision is due tomorrow.


The Canadian Dollar finished last week on the back foot, weighed by weaker-than-expected retail sales and mixed CPI data which pushed USD/CAD above 1.34 for the first time in two weeks.

Looking ahead, trade figures are out tomorrow followed by GDP on Friday.


Riksbank policymakers continue to play down recent inflation data keeping the Krona supported last week. EUR/SEK bottomed out at a two-week low on Thursday at 10.4078.

Trade data and confidence indicators are due on Thursday and retail sales on Friday.


The Norwegian Krone rose sharply last week following a relatively hawkish hike by the Norges Bank. EUR/NOK hit a daily low of 9.5907, its lowest level since mid-November, as Governor Olsen said he sees a fifty-percent chance of another increase in June.

Core retail sales and unemployment figures are out on Friday.

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