Key facts
- US retail sales experienced their first monthly decline in nine months.
- The dollar weakened against major currencies as market expectations shifted.
- Traders are increasingly anticipating a quicker pace of interest rate hikes from Japan.
- Japanese 10-year government bond yields reached their highest level in nearly 30 years.
- Alphabet is exploring its first Australian dollar bond issuance.
The U.S. consumer may be showing signs of weakness, with retail sales declining for the first time in nine months, potentially influencing the Federal Reserve's decision to keep interest rates on hold. This comes as traders are increasingly betting on the Bank of Japan accelerating its pace of rate hikes, pushing yields on 10-year government bonds to near a 30-year high.
In Asian trading, the dollar broadly weakened as market sentiment shifted. The Australian and New Zealand dollars reached two-month highs, while sterling and the euro also saw gains. Alphabet is reportedly working with banks on its first Australian dollar bond sale, signaling a trend of hyperscalers seeking funding beyond the U.S. for their capital expenditures.
The yen saw a slight increase as expectations for Bank of Japan rate hikes grew. Bank of America analysts anticipate four hikes between September and July of next year, bringing the policy rate to 2%. Despite a miss in Japanese economic growth data, markets reacted positively, driving up bond yields.
Looking ahead, European data is sparse on Monday, but China is set to release rescheduled monthly economic activity and housing data. Canada's inflation figures are also due, with European confidence indicators, flash PMIs, and minutes from the last Fed meeting expected later in the week.