The dollar shot higher on Tuesday after an astounding 17.7% rebound in U.S. retail sales in May nAQN02OJY5 lifted Treasury yields, erasing the currency's earlier losses on the latest Fed relief nL1N2DS1IMnL1N2DS0TD and a Bloomberg report that the Trump administration was preparing a $1 trillion infrastructure plan Click here .
Fed Chair Jerome Powell said the retail sales report and May's unexpected jobs recovery nAQN02MYTL showed economic support efforts were working, but it would take time mend the labor market nW1N26P027.
He also said the Fed would have to follow through on its pandemic support plans, and the government would likely have to supply more support, but dismissed negative yields and said yield curve control was only under early discussion.
EUR/USD slid within a tick of Monday’s 1.1227 low as Bund-Treasury yield spreads narrowed.
EUR/USD's bounce off the lows wasn't helped by German Chancellor Angela Merkel lowering expectations that Friday’s European Council meeting would produce an agreement on the bloc’s finances nS8N2D905N, with markets particularly interested in the 1.85 trillion euro European recovery plan's prospects nB5N28S00W.
Large and widespread equity market gains demonstrated less concern about pandemic lockdowns in Beijing nL4N2DT0KX than enthusiasm for extreme monetary support from the Fed and a UK study indicating a widely available steroid could help in treating COVID-19 nL8N2DT3ME.
USD/JPY gains fizzled as both Treasury yields and stocks retreated from early-New York morning highs nL1N2DT23S, leaving the pair making another indecisive doji candle above the daily cloud top that Wednesday slips to 107.21 nL2N25Q0MW.
The yen rebounded on the crosses after holding 10-DMA supports for the haven, revealing a disconnect between currencies and other financial assets the Fed is more directly supporting.
GBP/USD's rebound attempt on a below-forecast UK jobless rate nL8N2DT0ZS and dollar weakness to start the week was roundly rejected by the 200-DMA hurdle with a big assist from the U.S. retail sales surprise nL1N2DT1WF.
AUD/USD and AUD/JPY struggled after the Beijing lockdown news and ahead of Aussie jobs data nL1N2DT1YK.
Commodity currencies and emerging markets were mixed amid oil gains on hopes that a strong U.S. recovery would boost demand and sideways copper and gold prices showing lingering investor uncertainty.
Powell will appear again tomorrow, but he already answered most of the market's questions on Day One.
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