The Greenback Breaks Higher on Solid Data
The dollar moved higher on the first trading day of December, increasing in value against the yen as the yield differential continued to move in favor of the greenback. The US – Japan 10-year yield differential topped 255 basis points which is the highest since May of 2013, and a 4-year high for the spread.
Economic data reported on Monday reflected strong manufacturing activity. China’s reported official manufacturing purchasing managers index, held steady at an 18-month high of 51.4 in November and topped consensus of 51.1. The HSBC print private report, slipped to 50.8 last month from 50.9 in October.
In Europe, governments reported their purchasing managers survey’s that reflect the state of manufacturing in the region. Nearly all the purchasing managers’ indices in Europe were stronger than expected. UK, German, Swiss, Italian, and French surprised on the upside. The headline EU PMI came in at 51.6 compared with 51.5 expected.
Although the credit news in the core of Europe was unfortunately, news in the periphery was uplifting. S&P cut its Dutch ratings to AA+ from AAA. Over the weekend, Moody’s upgraded its rating for Greece by two notches to Caa3, citing the optimism regarding it achieving a primary budget balance. This comes on the heels of L S&P upgraded its outlook for Spain to stable from negative last week. Bond in the periphery has reflected this outlook with spreads continuing to tighten.
The USDJPY surged higher on Monday, and is poised to test the 2013 highs near 103.75. Support is seen near the 10-day moving average at 101.55. Momentum on the currency pair is strong with the MACD (moving average convergence divergence) index printing in positive territory with an upward sloping trajectory. The RSI on the other hand is printing in overbought territory which could foreshadow a correction.
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