3% Pulls Dollar Higher

Bonds remained the dominant driver on Monday as US 10-year yields close in on 3%. The US dollar led the way while the yen lagged. Australian CPI is due up next. Below is the video for Premium subscribers clarifying Ashraf's take on USD in terms of price and time.

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The US 10-year on-the-run note rose as high as 2.9957% on Monday in a 2 basis point rise. It's a fresh high this year but all the focus is on 3%, which may spark some worries about borrowing costs. It's an arbitrary number but the underlying theme is a Fed that's increasingly confident about hikes. Another level to watch is 3.22% in 30-year bonds. That level was the top in 2016, 2017 and earlier this year.

The dollar was helped along by several economic releases. The Markit services PMI was at 54.4 vs 54.1. The manufacturing PMI was at 56.5 vs 55.2 expected and existing home sales rose to 5.60m vs 5.55m expected.

Cable fell back below 1.40 in the fifth day of sharp declines on a BOE re-think. Adding to the woes is Theresa May's sudden inability to get legislation through the House of Lords. 

Looking ahead, the focus will shift to the Australian dollar with Q1 CPI data due at 0130 GMT. It's a critical report that's expected to show inflation rise by 0.5% in the quarter, a slight deceleration from 0.6% in Q1. That's in contrast to the trimmed mean, which is forecast to accelerate to 0.5% from 0.4% q/q.