- Forex today was mixed but made for a positive environment for the greenback.
- China’s response to US trade tariffs also seemed to drive flows into the greenback as the US is regarded to have the edge over its counterparts in China and Europe.
Forex today was mixed but made for a positive environment for the greenback that soared across the board as investors took up the central bank’s divergence theme that favours the dollar. At the same time, China’s response to US trade tariffs also seemed to drive flows into the greenback as the US is regarded to have the edge over its counterparts in China and Europe.
The DXY rallied onto the 95 handle within the day’s range of between 94.6100-95.1890. As for yields, the US 10yr yields were once again knocking the doors of the psychological 3.00% mark but gave some space back to 2.98% while the 2yr yields were dipping below 2.66%.
As for economic data, it arrived with downward revisions to durable goods, but that did little to slow up the pace of flow into the greenback in North American trade. US June factory orders +0.7% vs +0.7% expected and US weekly initial jobless claims 218K vs 220K expected. Markets now look ahead to nonfarm payrolls expected to be strong against the backdrop of the ADP numbers and the uptick in manufacturing employment.
meanwhile, attention was on the BoE ahead of the NY open where, as widely expected, rates were hiked to 0.75% by 0.25bps, (with a 9-0 vote), but the ultimate take on this was that there will not be another hike until next year, (the bank lowered its rate trajectory over the 3 year forecast horizon and the pound buckled under the central bank divergence theme between the BoE and the Fed, (was taken as a dovish hike), after an initial knee-jerk spike to 1.3123. GBP/USD fell about 1 cent to 1.3020 over the day, closing NY at 1.3016. As for the euro, it dropped to 1.1585 on the dollar’s tear and the DXY moving above 95 the figure. The Yen was picked up again on the safe haven bid on trade tensions and EUR/JPY slipped down to 129.25, also weighing on the euro. The spread was favouring the dollar leg, although the German 10yr Bunds were steady at 0.46%. EUR/USD held near 1.16 the figure in a recovery late int he day but dropped again into the close at 1.1583. The cross was higher by 0.26% to 0.8908 within Thursday’s range of between 0.8925-0.8855 while markets sold the fact and the BoE on hold for the foreseeable future keeps the euro leg bid as markets look ahead to further Brexit noise to come from PM May as set to meet with French President Macron on Friday – U.K.-E.U. negotiations are set to resume in mid-August. USD/JPY was lower on the back of trade war angst that sent European markets over the edge, but there was a recovery in risk appetite on Wall Street with iPhone’s record capitalization and a recovery in the tech sectors along with positive earnings. USD/JPY recovered from 111.31 and rallied to 111.79 for a close of 111.63 – (stops below 111.40 proving to be a tough area of support).
As for commodities, the sector is on thin ice and high-beta FX was lower again. The CRB is still trying to hold neckline support. Copper slipped in European trade but steadied NY trade. AUD/USD slid -0.4% to 0.7359 the close and the bear sentiment has increased as pair sets a new short-term low at 0.7355. However, there was a sharp bounce with risk improving and in the same for U.S. equity markets – 0.7383 was traded before faded to aforementioned lows.
Key notes in US:
Wall Street pares early losses to close in green, Apple’s market cap hits $1 trillion
Key events from Asia:
Analysts at Westpac noted that Australia’s June official activity data releases continue at 11:30am Syd/9:30am Sing/HK with retail sales:
“Westpac looks for a 0.3% m/m rise in June nominal turnover and 0.8% q/q for inflation-adjusted Q2 sales (both are in line with the median forecast). Guideposts such as consumer and business sentiment surveys were mixed in June but a mild positive could come from reduced discounting. The sharp rise in real retail sales we expect in Q2 needs to be viewed in the context of a weak 0.2% in Q1.
Asia’s data calendar features several second-tier releases, including trade data in South Korea and Malaysia and China’s July services sentiment survey (sponsored by Caixin magazine). This is seen remaining firmer than the manufacturing equivalent, around 53.5.”
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