The US dollar was soft overnight with the People’s Bank of China declaring that the yuan would be stable. (USD/CNY rose above 6.70 for the first time since August 2017). The DXY was lower within the day’s range of between 94.5620-94.9780, closing -0.29%. Fed fund futures yields continued to price 1 ½ more hikes in 2018. As for treasuries, the US 10yr treasury yield fell from 2.88% to 2.83%, while 2yr yields fell from 2.56% to 2.53%. Fed fund futures yields continued to price 1 ½ more hikes in 2018.
Meanwhile, for US data, the May factory orders report included positive upward revisions to new orders of durable goods ex-transportation from a 0.3% m-o-m decline to no change. Markets will be closed in the US today but there is plenty of data up for grabs, including ADP private employment, initial jobless claims, ISM non-manufacturing index and the FOMC minutes.
For other currencies, the single unit was slightly higher vs the greenback climbing to 1.1660, (21-D SMA 1.1669), while in a consolidation of the long-term losses continues. Sterling was also higher by +0.23%, or $0.5c, to 1.3207 within the range of 1.3116-1.3207. UK construction PMI was a beat and BoE’s Saunders was hawkish and eyes gradual hikes, suggesting the there could be a faster rate of hikes than the market expects. As for the cross, EUR/GBP was ending the NY session at 0.8843, down -0.17%, having traded within an NY range 0.8857-0.8832. Traders eye UK minister meeting on Brexit this Friday which will be key while currently, higher odds of an August hike are trumped by Brexit uncertainties.
Wall Street was offered and this helped USD/JPY bears to bring the pair down from around 111 to 110.55 in the NY morning, aided by weaker treasury yields where a correlation in the pair to lower oil, (ran shipping threat), was also evident. As for the antipodeans, the Aussie was the best performer that rose from 0.7340 to just above 0.7400 aided by a recovery in the yuan and upbeat risk while the RBA had little effect in AU government yields – eyes are on the 0.7440/80 resistance zone and 0.7300 on the flipside. As for the Kiwi, it too climbed and despite the GDT auction where prices were falling 5% and whole milk powder down 7%. The bird took flight from 0.6700 to 0.6755.
Key events in the US:
- Wall Street ends holiday-shortened session lower
Key events in Asia:
Analysts at Westpac explained the key events as follows: “At 11:30am Syd/9:30am Sing/HK we see Australia’s May data on retail sales and the trade balance. AUD tends to react most to the retail report. Sales rose 0.4% in April, a bounceback from March’s flat result but leaving the y/y change at a lukewarm 2.6%. Westpac looks for a further 0.3% gain in May, in line with consensus. This would not be strong enough to alter the concern the RBA repeated after yesterday’s meeting about household consumption, which it deems constrained by high debt levels and slow income growth.
Australia looks set to print a trade surplus for a 5th straight month in May. Westpac looks for a 1% rise in imports outweighed by a 2% gain in export values, to boost the surplus from $1.0bn to $1.3bn. Consensus is $1.2bn.
June services sentiment surveys by Markit are due in China (sponsored by Caixin) and India (Nikkei). Only 7 forecasters on Bloomberg bother to estimate the China survey, with a median of 52.7, versus 52.9 in May. The equivalent survey for the US was much stronger, at 56.5.”
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