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Analysts at Westpac explained that upbeat sentiment was evident in equity markets.  

Key Quotes:

“The S&P500 up 0.9% to a six-month high, and the US dollar fell, allowing AUD/USD and NZD/USD to rise.”

“Trump and EU Commission President Juncker reached an amicable trade solution, bringing a “new phase” of trade relations. The two leaders will work toward “zero” tariffs on industrial goods.”

“The US dollar index is down 0.4% on the day. EUR rose from 1.1680 to 1.1725. USD/JPY fell from 111.30 to 110.67. Commodity currencies rose strongly on the trade news: AUD rose from 0.7395 to a two week high of 0.7464, reversing the earlier post-CPI losses; NZD rose from 0.6790 to a two week high of 0.6842 and the C$ hit  6 week  highs against the US$.”

“EM currencies continued their strong performance – the Mexican Peso is close to  3 month  highs while the Brazilian Real is up 3.8% in the last 5 days. The JP EM FX index is at  6 week  highs.”

“US new home sales fell by a much steeper than expected 5.3% in June, downward revisions to the prior month – now reported at +3.9% from +6.7% – accentuating the impression of weakness. Three out of four regions posted declines and the monthly supply of homes rose to its highest levels since August 2017. The fall in new home sales matches weakness in other housing data in recent weeks including falls in building permits, existing home sales and housing starts. Rising mortgage rates and the less  favorable  tax treatment for home ownership under the Trump tax plan may be culprits.”

“A minimal dip in German IFO surveys headline (101.7, from 101.8) belies the continuing moderation this year. Current conditions were firm, but expectations (98.2) were soft highlighting concerns over trade and the likelihood of a challenging Q3.”

“US 10yr treasury yields eked a narrow sideways range between 2.93% and 2.95% until the Trump/EU headlines caused a jump to 2.97%, while 2yr yields rose from 2.64% to 2.67% – the highest since 2008. Fed fund futures yields are now pricing almost two more full hikes in 2018.”