The US$ remains firm, at a 3 week high on Wednesday, as hopes diminish that the Fed will ease monetary policy aggressively in coming months, while concerns are also building that corporate profits are being hit by the US/China trade war and kept a lid on equities on Tuesday, especially after BASF, the world’s largest chemicals company, warned that the trade tensions will hit profits. US stocks ended flat, while the German Dax fell by 0.9%. Elsewhere in Germany, Daimler cut its profit outlook for the 3rd time in a year, while Deutsche Bank has begun to cut 18,000 jobs globally in a restructuring play to save the bank, none of which is good news for the Euro. Although the ranges for the US$ pairs was generally small, the Aud$ remains particularly heavy on Tuesday after some soft domestic data and feels soft again on Wednesday.
In other markets, the metals traded a tight range, while WTI jumped after the release of the API Weekly Crude Oil Stock Inventory data showed a larger than expected draw on stockpiles of 8.1 million barrels (exp -3.1mio). In the bond market, yields were generally a little higher and have already priced out the unlikely scenario of a 50bp rate cut by the Fed on July 31, but a 25bp cut is fully priced in, as is a second one by October.
Wednesday will become steadily more busy as the session progresses, which will start with a speech from the RBNZ Governor Orr, to be followed in Asia by the China CPI/PPI for June (CPI, exp -0.1%mm, +2.7%yy; PPI, exp +0.3%yy). The European session will look to the UK production data for May; the Manufacturing/Industrial Production (exp 2.3%mm/1.5%mm), Trade Balance, Goods Trade Balance and GDP (exp 0.3%mm), while the US session will see the Fed Chair Powell begin his testimony to Congress, when some clarification on Monetary Policy will be revealed and which will be followed by the FOMC Minutes, as well as the Wholesale Inventories for May (exp 0.4%).
Economic data highlights will include:
Wed: NZ Food Price Index, BBNZ Governor Orr; Speech, China CPI/PPI, ECB Non- Monetary Policy Meeting, UK Manufacturing/Industrial Production, Trade Balance, Goods Trade Balance, GDP, US Fed’s Powell speech, US FOMC Minutes, CPI, Wholesale Inventories, EIA Crude Oil Stocks Weekly Change, weekly Jobless Claims
Market moves, in brief:
FX: DXY 97.50 (+0.14%)
Bonds: US10Y; 2.069% (+1.12%), German 10Y; -0.355% (+3.67%), UK 10Y; 0.717% (+1.66%), Australian 10Y; 1.331% (0.00%), NZ 10Y; 1.54% (-0.65 %), China 10Y; 3.216% (+1.66%)
Stock Indices: DJI; -0.008%, S+P; +0.12%, NASDAQ; +0.54%, EUStoxx50; -0.40%, FTSE100; -0.17%, Shanghai Composite; -0.18%,
Metals: Gold $1397 oz (0.16%), Silver $15.11 oz (+0.54%), Copper $2.625 lb (-1.28%), Iron Ore $111.00 per tonne (NYMEX) (+1.83%),
Oil: WTI $58.36 pb (+1.46%)
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