Overnight, escalating geopolitical risks in Yemen pushed antipodeans lower while supporting JPY, CAD and NOK (the latter two moving in tandem with oil). The conflict in Yemen has been simmering for a while now and the Saudi-led military intervention may actually bode well for its quick resolution. This may suggest that lingering geopolitical risks need not grow into a pronounced market rout.
Then again, we note that the US stocks have closed in the red for a third day running on the back of softer than expected real economic data. Fed’s Lockhart further highlighted last night that he expects to be voting to hike rates in September at the latest.
A paper by the Chicago Fed overnight highlighted that structural factors rather than harsh weather may be behind the sharp GDP contraction during the winter of 2013/14. All in all, disappointing data in combination with the prospect for (delayed) Fed hikes does not seem to bode well for USD-denominated risk-correlated assets and the dollar.