Dollar bounce limited; Evans from dove to hawk - BBH

Analysts at Brown Brother Harriman noted that the US dollar had a short-lived boost during the Asian session, however, as soon as the European kicked in, those gains were tamed. 

Key Quotes

"The dollar is mostly firmer against the majors. Sterling and the Loonie are outperforming, while Kiwi and the yen are underperforming. EM currencies are mixed. TRY and RUB are outperforming, while PHP and RON are underperforming. MSCI Asia Pacific was down 0.3%, with the Nikkei falling 0.5%. MSCI EM is up 0.4%, with China markets rising 0.4%. Euro Stoxx 600 is up 0.3% near midday, while S&P futures are pointing to a lower open. The 10-year UST yield is up 2 bp at 2.36% ahead of the 30-year auction today. Commodity prices are mixed, with oil up 1.1%, copper down 0.2%, and gold flat."

"The US dollar was firmer against most of the major currencies in fairly quiet Asian turnover, but saw those gains pared in early Europe. The highlights include the RBNZ meeting that left rates on hold, as widely expected. The concern about the strength of the Kiwi saw the market reduce the perceived likelihood of a rate hike. NZD came off accordingly." 

"Still, it looks like Japan has surpassed Germany to move into second place by having the largest trade surplus with the US after China. Separately, in the region, we note that China's shares that trade in Hong Kong were the strongest with the 1.2% rise.  It is a 14-month high."

"Core bond yields are firmer. Of note, despite the continued political focus, the premiums over Germany are mostly narrowing again. The French premium is smaller for the third consecutive session, for example. The Italian premium pushed through 200 bp at the start of the week, but is now back near 190 bp."

"US highlights are not very high. Weekly initial jobless claims and wholesale sales and inventories are not the stuff that moves the market. Two Fed officials speak, Bullard and Evans. Bullard adopted a new framework last year and his views were a bit of an outlier. Evans has been a dove but most recently he suggested he sees scope for two and possibly three hikes this year."

"Some were linking yesterday afternoon’s bounce in the dollar to the 10-year UST auction, where a lack of demand helped push 10-year yields up from the 2.32% intraday low. Rates were higher across the curve as a result. Today, there's scope for more bond market volatility as the US holds a 30-year auction with results to be announced at 1 PM ET."

NZD/USD bounces off three-week lows, retains bearish bias near 0.7215 level