U.S. Industrial Production, Building Permits, Powell Speaks

The dollar reached its highest since early November against a basket of currencies on Monday with the US Dollar index (USDX) ending the session 0.24% higher after U.S. retail sales increased more than expected in March. Retail sales rose 0.7% last month and data for February was revised higher to show sales rebounding 0.9% instead 0.6% as previously reported.

After the signs of sticky inflation and strong growth market participants pushed back expectation on when the Federal reserve is likely to begin cutting rates. According to the CME Group's FedWatch tool bets on the first cut to occur in June remain just above the 20%.

On the energy front, oil prices ended the session with minor gains on Monday as Israel faced growing pressure from allies to show restraint and avoid an escalation of conflict in the Middle East as it considered how to respond to Iran's weekend missile and drone attack. Iran's weekend attack on Israel proved to be less damaging than anticipated, easing concerns of a quickly intensifying conflict that could displace crude barrels. NBC news reported on Monday that Israel was considering an "imminent" response to Iran’s recent strike. Other reports showed that Israel's war cabinet had met over the weekend without reaching consensus on a response.

In Wall Street the sentiment remained negative, as an early lift from a strong retail sales report succumbed to a jump in Treasury yields and concerns about rising geopolitical tensions between Iran and Israel, with the US 500 coming off its biggest one-day percentage drop since Jan. 31 in the prior session. On the earnings front, quarterly results from Johnson & Johnson, United Health Group Incorporated, Bank of America Corp and Morgan Stanley are due today.

Several members of the Federal Reserve are also set to speak later Today, with particular focus on Chair Jerome Powell for any more cueston interest rates. Powell is set to have a discussion with Bank of Canada Governor Tiff Macklem.

EUR/USD

The EUR/USD pair started the week with moderate losses ending the session 0.20% lower. The major currency pair weakened as robust spending by United States households at retail stores in March has improved the US Dollar’s appeal.

The US Census Bureau reported that monthly Retail Sales grew strongly by 0.7% from expectations of 0.3%. In February, Retail Sales data rose by 0.9%, upwardly revised from 0.6%.

On the Eurozone front, European Central Bank (ECB) policymaker Peter Kazimir see possibility of rate cuts starting from the June meeting if inflation continues to fall.

Investors’ concerns about an escalation of the Middle East conflict, as Israel weighs the options to retaliate from Iran’s missile attack is an additional support for the safe-haven US Dollar.

Gold

Gold prices climbed on Monday due to safe-haven demand spurred by Middle East tensions, even as the dollar and Treasury yields gained following a higher-than-expected uptick in U.S. retail sales in March.

Iran launched explosive drones and missiles late on Saturday in the first attack on Israel by another country in over three decades, stoking fears of a broader regional conflict.

On the other hand, the dollar rose, and 10-year Treasury yields hit a five-month high after data showed U.S. retail sales increased more than expected in March, further evidence that the economy had ended the first quarter on solid ground. The market now sees fewer than two 25-basis-point cuts by the year-end, after previously expecting three.

WTI Oil

Oil prices traded between losses and gains on Monday and ended the session slightly higher after Iran launched a large-scale drone and missile strike against Israel over the weekend.

The attack presented limited upside for oil prices, given that it was largely telegraphed and caused little serious damage.

Israel’s response to the attack is now expected to determine just how the conflict will play out, with the country reportedly said to be preparing to launch an imminent response against the Iranian strike.

Tensions between Iran and Israel have been a key point of support for oil prices, as traders bet that a widespread conflict in the Middle East will disrupt supply from the oil-rich region.

US 500

Wall Street ended sharply lower on Monday amid rising U.S. Treasury yields as simmering tensions in the Middle East helped curb investor risk appetite.

All three indexes posted huge losses with US 500 lossing 1.54% while US 30 and US Tech 100 retreated 0.87% and 2.01% respectively.

Hotter-than-expected U.S. retail sales data showed that consumer spending remained strong- a trend that is expected to underpin inflation in the coming months and keep interest rates high.

Moreover, the Q1 earnings season saw a weak start with disappointing readings from a slew of major banks.

On Tuesday the earning season contunues with quarterly results from Johnson & Johnson, UnitedHealth Group Incorporated , Bank of America Corp and Morgan Stanley.