The dollar is trading up against the euro, pound and Japanese yen off of rising U.S. Treasury yields and slightly better-than-expected retail sales. Earlier, U.K. wage growth and Eurozone GDP met expectations.
Dollar helped by retail gains
The U.S. dollar is trading up Tuesday morning after the 10-year Treasury jumped above 3% again and retail sales rose for the second month in April.
Retail sales month over month increased 0.3% as expected, but the previous month was revised to 0.8% growth. The retail sales control group also met expectations of 0.4% growth. March data was revised up to 0.5% from 0.4%. The revisions make the report stronger than expected.
The continued consumer demand is being attributed to bigger after-tax paychecks that helped offset rising fuel costs.
The EUR/USD pair is trading down around 1.184 after making a run at 1.20 Monday.
The dollar is also gaining against the pound, trading down around 1.348. The pair broke through 1.36 yesterday before retreating on USD strength.
USD/JPY broke through 110, trading at its highest levels since early February.
U.K. wage growth outpaces inflation
The rate of growth for U.K. worker’s average earnings overtook CPI inflation for the first time since February 2017.
Wage growth had been lagging inflation for the past few quarters, but earnings excluding bonuses showed a 2.9% increase for the three-month average ending in March. The consumer price index grew 2.7% in the same period.
Although the wage growth is good news for the U.K. economy, productivity fell and the number of unemployment claims increased for April, not allowing the pound to gain off the news.
GBP/USD traded flat around 1.354 after the report and then began to fall ahead of U.S. retails numbers. The pair was trading around 1.347 at 9:30 a.m. EST.
European GDP confirms slow growth
The Q1 GDP reading for the Eurozone met expectations of 0.4% growth quarter over quarter. German Q1 GDP didn’t quite meet expectations, with growth of 0.3% quarter over quarter compared to 0.4% estimated.
Portuguese and Dutch GDP readings also missed expectations.
However, the German ZEW survey released in between the GDP readings indicated that there is more optimistic sentiment among investors.
EUR/USD fell on the GDP news and has continued its decline due to USD strength and U.S. retail sales.
Mixed messages entering China talks
After President Trump tweeted out a message Sunday indicating that the U.S. will help Chinese tech company ZTE get back into business, Commerce Secretary Wilbur Ross had a different message on Monday.
Ross told reporters that the U.S. is looking into alternative punishments for ZTE for breaking sanctions law. “ZTE did do some inappropriate things,” Ross said, then emphasizing that this issue should be separate from the trade talks with China this week.
Trump then said in a tweet Monday night that the fact that ZTE buys parts from U.S. companies makes it reflective of the larger trade deal with China.
Vice Premier Liu He is expected to stay in Washington, D.C. for talks until Saturday.
The uncertainty around trade continues to play in the background of the foreign exchange markets.