USD gives up early gains as equities rally
What happened overnight
– UK inflation comes in a bit firmer than expected, up 3.5%yoy
– RBA minutes confirm likelihood of May easing
– German ZEW indicator unexpectedly improves
– Spain sees good demand for 12- and 18-month T-bills
Major pairs are little changed on net this morning, with an early bout of USD strength reversing as risk appetite stabilizes. EURUSD is stable around 1.3145 after its late rally Monday, while AUDUSD is holding above 1.0360 after dipping to 1.0305 following the release of the RBA minutes. Sterling is outperforming after an above consensus CPI reading and less dovish comments from MPC member Posen. In emerging markets, the ZAR is outperforming on news South African government bonds might be included in a major bond index. Equity markets were weaker across the board in Asia, but have rallied in Europe, with the S&P future up 0.5%. Sovereign yields have moved lower in Europe, with the Spanish 10-year yield down 15bp to 5.87% after strong demand at a Spanish 12- and 18-month bill auction.
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Credit Suisse
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