We saw weak US CPI and retail sales data last Fri, which leaves lingering doubts over the reflation narrative and will place the brakes on how steep the Fed tightening path can be.
We have long highlighted the dichotomy of how soft data (consumer/biz sentiment) had surged post-Trump election but that the hard data had struggled to keep up. Notably, how a strong labour market has failed to generate a sustainable acceleration in wage growth which will eventually serve as a feedback loop dragging on consumer demand.
Bear in mind too President Trump's massive policy flip-flops (of not labelling China a ccy manipulator, now leaving the door open for Fed Chair Yellen to be re-appointed, his preference for a low interest rate policy and how that calls into question the previous notion that he will push hawks into the Fed) and how we still don't know any details of his fiscal/tax plans (which we think will be watered down at best), and we are of the view that market pricing for a Jun Fed hike (currently at 56.7%) will dip ahead.
Note that the US Treasury's currency report bore no teeth, with it saying no nation has met the definition of a ccy manipulator but kept the same 6 countries (China, Germany, Japan, Korea, Switzerland and Taiwan) on it's watch list.
Recall too that Trump jawboned the USD lower last Wed.
Look for all the above to keep USTs well-bid and for the USD to stay on the backfoot in the n/t.
As mentioned last Thurs, the USD Index broke below it's it's uptrend line from the 27 Mar low (then at 100.97) and it's 50-day MA 100.79 which was a tech negative signal.
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