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  •  Given the US holidays, markets were quiet.
  • The US dollar traded between 94.3970-94.7120 and was mid-ranged for the best part of the day.
  • The euro popped 20 pips to score a session high 1.1663 on  Bloomberg report.

 Given the US holidays, markets were quiet following a non-eventful European session where the calendar there too was light of events, of which those that were up for grabs were largely ignored.  

It wasn’t until a Bloomberg report citing sources over ECB policymakers who are uneasy that markets are not pricing an interest rate hike before Dec 2019 until we saw any action whereby the euro popped 20 pips to score a session high 1.1663.  

The US dollar traded between 94.3970-94.7120 and was mid-ranged for the best part of the day.  While the cash US treasury market was closed, 10yr treasury futures yields rose slightly from 2.83% to 2.84%. On the back of the Bloomberg report, German 2yr bond yields rose 2bp from -0.67% to -0.65%. EUR/USD’s slide from 1.1680 to 1.1631 was picked up on the narrowing of the spreads and closed at 1.1655 while markets are now expecting a rate hike by Sep or Oct 2019. For the pound, data from the UK did draw some attention where the price rose from 1.3170, (in a reversal of the 1.3227 Asian sell-off), and traded as high as 1.3248 in NY. The June service and composite PMIs were a beat vs the consensus which is seen to open up the case for an August rate hike, (following solid construction data earlier – (UK June service came in at 55.1 vs the expected unchanged number at 54.0). EUR/GBP was supported down at 0.88 the figure, (slipping below there momentarily to a low of 0.8799 in London) and made a recovery high of 0.8820 in NY, closing at 0.8807 in choppy conditions around the Bloomberg/ECB noise.  

USD/JPY wasn’t going anywhere outside of a 25 pip range between 110.34/54. The pair picked up a bid in early European trade and hit up the said highs before resuming into 10 pip sideways range for the quiet NY session, with bears picking up some pips on the ECB headlines as well as the DXY deteriorated.  

AUD/USD was on the backfoot despite yesterday’s bear in the retails sales data. The pair was deflated by copper prices falling to a nine-month low while the price of the Aussie vs the greenback fell just shy of the previous NY session lows of 0.7370 after reaching a nine-day high in Asia following the retail sales beat. For the rest of the week, eyes will be firmly placed on China and the US engaged in a tit for tat spat around trade while Chinese tariffs on U.S. goods to take effect on Friday.  According to Reuters, China is expected to begin imposing tariffs on $34 billion of U.S. goods on Friday. – (A Chinese source told Reuters that “”Our measures are equal and being equal means that if the U.S. starts on July 6, we start on July 6.” )

China is expected to begin imposing tariffs on $34 billion of U.S. goods on Friday, Reuters reported Wednesday, citing a source close to the plan. The Trump administration’s own tariffs on up to $50 billion worth of goods from China are also due to take effect Friday, but owing to time differences, China’s tariffs would kick in 12 hours sooner. “Our measures are equal and being equal means that if the U.S. starts on July 6, we start on July 6,” the source told Reuters.

Key events ahead:

In a preview of the day ahead’s key events, analysts at Westpac explained that Australia’s data calendar goes quiet until Tuesday when we see June NAB business confidence:

“The RBA’s Heath delivers a lunchtime speech in Wollongong.

June inflation data in the Philippines and Taiwan is expected to show an ongoing sharp divergence, with consensus 4.8%yr and 1.5%yr respectively.

US markets reopen from the national holiday and the economic calendar plays catch up. Of most interest should be June ADP private payrolls, June non-manufacturing sentiment (ISM) and the minutes from the FOMC’s 12-13 June meeting.

Consensus on the ADP survey is 170k but the series hasn’t been too helpful in predicting official data: in May ADP’s estimate was 178k but the actual private payrolls rise was 218k. National service sector sentiment from ISM should remain consistent with strong domestic growth, holding somewhere around May’s 58.6 headline and with interest in the employment index.

The FOMC minutes will provide more detail on the decision to raise rates in June and plan for more. There is often a market reaction to some of the views of anonymous FOMC members.”