True Conviction: The Majors To Follow US Data

Wow! Pricing in the "tapering trade" can unwind just as quickly. Yesterday provided another fine example of how swiftly a fickle market can change sentiment. A disappointing US ISM headline print took investors by surprise and provided the market the ammo to sell the dollar with a 'rabid viciousness.' For most of last month the talk centered on the Fed reducing its bond purchases as early as late summer. Investors were quick to price that in, lifting US 10-year yields +50bp on the month. But, how strong really are current investor's convictions?

After just one US economic release in June the market seemed to have overshot expectations and were an aggressive off-loader of dollars yesterday. Proven time and time again one economic release does not make a "market conviction" – the dollar has rebounded smartly in the overnight session, especially against the Yen and AUD$, mostly on the back of the Nikkei grinding +2.1% higher.

Despite the Euro region remaining in...