The easier producer price numbers and Fed speakers were also enough to drag Treasury yield back off the year’s highs – with two-year yields recoiling from 5% to settle just over 4.90% first thing on Friday.
Rising tension surrounding an imminent Iranian response Israel’s attack on its Syrian embassy may have added a safety bid to bonds ahead of the weekend. Gold, which has now risen 17% in just six weeks, hit another record high of $2,400 early on Friday and U.S. crude oil ticked back above $86 per barrel.
The dollar too was pumped up – with its index hitting another 2024 high.
But the buck is gaining as much on the shift in central bank sequencing – with the European Central Bank indicating on Thursday that it may well go ahead and cut rates in June regardless of Fed hesitation.
Confirmation that German inflation sank to its lowest in almost three years at just 2.3% last month underlined expectations that the ECB will go solo by midyear.
German two-year government debt yields fell back 10 basis points and European stocks jumped 1% on Friday as a result.
But the euro plunged to its lowest of the year, clocking its biggest 3-day drop in 14 months.
The dollar was also bolstered by ongoing Japanese yen weakness to 34-year lows and the shocking Chinese trade data that hit the yuan.
China’s March exports contracted sharply, while imports also unexpectedly shrank, both undershooting market forecasts by big margins. Shipments from China slumped 7.5% year-on-year last month, marking the biggest fall since August last year and compared with a 2.3% decline forecast in a Reuters poll of economists.
Chinese stocks ended the week in the red as a result.
Even though sterling also fell back to a one-month low against the dollar, markets are less sure the Bank of England will be as bold as the ECB in cutting rates as soon as June. Money markets price less than a 50% chance of a BOE move that month.
What’s more, Britain’s tepid economy is on course to exit a shallow recession after output grew for a second month in a row in February and January’s reading was revised higher.
And former Federal Reserve Chair Ben Bernanke will set out on Friday how the Bank of England should reform its economic forecasting.