To try and connect them solely to the US data is a little uncomfortable. Yes, weaker trade number implies a decent downward revision to Q1 GDP. On its own that might imply the USD move – but it doesn’t imply steepening of global curves or rallying oil. It is highly unlikely the Fed would consider reflation. Additionally, ISM surprised to the upside quite sizably, and most of its components did as well. One doesn’t neutralize the other – but it helps limit some effects.
Curve steepening can be linked to both liquidity issues (see The liquidity paradox) and a continuation of the sell-off that started last week. Although overlooked by FX markets, US & GE 5y sold off 14bp and 12bps respectively before last Friday’s close. Gilts sold off 10 bps. It appears this week concerns on the Carry trade are moving further into less liquid debt. So, if we were to speculate as to what the trigger for the move it would be forced squeezes into less liquid notes and the reduction of carry trade has played a hand as well.
Trying to connect them all to Europe is also a little uncomfortable. EURUSD had approximately a 1% move today (trough to peak), but as a whole USD crosses moved more than EUR crosses. One notable fact, is it is very hard to keep EUR down when oil is rallying. Similar to the bond market moves, the oil rally has been taking place for some time.
Can these positions squeeze periodically? Yes, higher market volatility (in FX this should be abundantly clear, look at CVIX) and market liquidity are playing larger factors in day-over-day dynamics and pushing investors out of positions. Today was an increasing reminder.