Market wrap: US yields continued Thursday’s decline - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"US GDP rose 2.3% annualised in Q1 (vs 2.0% expected), the positive result tempered by a clear softening in consumer-driven momentum from 2017. On the positive side, personal disposable income jumped a solid 3.4% (tax cut driven), the core price measure rose 2.5% and business investment added +0.9pts."

"Perhaps more noteworthy for the Fed, the employment cost index rose 0.8% in Q1 (vs 0.7% expected). Private wages and salaries (i.e. net of benefits and the public sector) grew a very solid 1.0% (vs 0.5% in Q4) - the largest quarterly gain since Q1 2017. Gains were broad based across both goods and services."

"UK Q1 GDP posted a meagre 0.1% q/q and 1.2% y/y against already low expectations of 0.3% q/q and 1.4% y/y. The Office of National Statistics stated that the miss was only partly related to wintry weather with weakness across all sectors, notably a -3.3% fall in the already weak construction sector. Markets reduced the chance of the BoE raising rates by 25bp in May to around 20%, from around 50% prior to the release. Only 8 days earlier, markets were pricing a 80% chance. UK April consumer confidence and housing surveys were also on the weak side of expectations."

"The US dollar rose against major currencies just after the US GDP and ECI data, but quickly retreated. EUR/USD bounced off 1.2056 (a four-month low) to 1.2130. GBP/USD’s dismal couple of weeks continued in response to the UK GDP data, tumbling from 1.3925 to 1.3747 (two-month low)."

"USD/JPY spiked to 109.54 on the data but starts the week barely above 109.00. AUD/USD bounced off 0.7532 in early London trade (another low since December) to around 0.7580 into the weekend. NZD similarly bounced off 0.7040 (four-month low) to 0.7095. AUD/NZD ranged sideways between 1.0670 and 1.0720."

"The US 10yr treasury yield touched 2.98% on the US data but then continued Thursday’s decline to 2.96%, while 2yr yields were unchanged around 2.48%. Fed fund futures yields continued to price the next rate hike in June as virtually a done deal."