Risk of "Rising" !
Higher rates and rising geopolitical risk.
As geopolitical risk intensifies, typically a safe haven defensive asset should rally but here US Treasuries are being sold off as the risk of inflation resurgence outweighs the rest of the classical factors which used to be the norm not too long ago- possible realisation that the tail risk is that next move could be higher on rates.
Retail sales is the strongest evidence to date that US consumer is resilient - huge vote of confidence in the health of the economy as ebullient gains in employment & wage growth continue to drive rapid pace of consumer spending.
You can still pick a hole as 2.7% jump in online retail was mostly driven by Amazon “Big Spring Sale” March 20-25. However, inflation-adjusted control group sales show 3.0% growth in Q1 which sets up growth acceleration.
Add to this, NAHB home builder index - which held at 51- second month in a row above 50 for the first time since last summer. Simply put, this economy is not slowing and Higher for Longer is set to stay.
Philip Lane started dialling back when he said that there has been notably less progress in domestic inflation- Consensus June rate cut call is another disaster in the making - 1.0594, 0.786 of the Oct-Dec rise support may offer respite.
Challenges from property downturn and subdued domestic demand - Q1 5.3% growth better than expected. Retail sales rose by 3.1 % y/y in March while property investment fell by 9.5 % in Q1. Importantly 70-city average home price data showed new home prices fell -0.34% m/m & secondary home prices -0.53% m/m. No respite - 7.3500 break imminent.
Although today's jobs data leads event risk for GBP USD, path of least resistance for the GBP/USD pair is to the downside as the USD strength overwhelms any other factor - Friday's 1.2426 low support - break targets 1.2368, 0.618% Oct-March rise.
As per Reuters, BoJ is shifting to a more discretionary approach in setting policy with less emphasis on inflation ... "Various data must be scrutinised, not just the inflation outlook" such as consumption, wages and the broader economy - this policy change should open 160 plus - for now 34-year high at 154.45 took it within easier reach of twin fibos at 155.20.
Delaying the inevitable & denying the global reality - not sure whether such an exchange rate policy regime would end up without a long term economic cost.