Market wrap: whipsawed dollar unchanged on the day – Westbank

Analysts at Westpac Banking Corporation offered a market wrap with the US dollar index initially rising to a one-year high, but falling sharply after Trump’s comments – unchanged on the day.  

Key Quotes:

“EUR bounced off 1.1575 to 1.1678. USD/JPY fell from 113.17 to 112.06, the safe-haven yen outperforming. AUD initially fell from 0.7440 to 0.7323 – easily wiping out all the earlier jobs-data gains – but bounced to 0.7380. NZD similarly fell from 0.6780 to 0.6714 before bouncing to 0.6762. AUD/NZD pulled back from 1.0945 to 1.0900 and ranged sideways, still a bit higher than where it was pre-jobs data.”

“President Trump broke with  long established  protocols and criticised the Fed for raising interest rates. In an interview with CNBC to be aired today, Trump said, “I’m not thrilled. Because we go up and every time you go up they want to raise rates again. I don’t really “” I am not happy about it. But at the same  time  I’m letting them do what they feel is best.” The President also noted that the Chinese yuan is “dropping like a rock” and that the strong USD, “puts us at a disadvantage”. White House officials walked back the President comments noting that Trump respects the independence of the Fed and wasn’t interfering with Fed decisions.”

“The Philly Fed business survey rebounded by more than expected in July, the headline index rising to 25.7 from 21.5; a solid reading that confirms trade skirmishes are not yet meaningfully damaging sentiment. The underlying detail shows solid new orders (31.4 from 17.9) and building inflation pressures/supply bottlenecks; prices paid rose to a  post crisis  high of 62.9 while delivery times and unfilled orders rose too.”

“UK retail sales for June missed expectations with a headline -0.5% fall (exp. +0.2%), for an annual pace of +2.9% (exp. +3.5%). The positive impact of better weather and the World Cup was limited to food and beverage. Footfall in other areas actually dropped substantially. However, the ONS made it clear that 2Q as a whole had a very positive outcome, rising 2.1%, the largest quarterly pick up for over three years.”

“US 10yr treasury yields initially rose to 2.90% but started falling during the NY session,  Trumps  comments extending the decline to 2.83%.  Two year  yields similarly fell from 2.63% (a decade high) to 2.58%. Fed fund futures yields continued to price 1 ½ more hikes in 2018.”