Dovish comments from the NY Fed President, Williams, has sent the US$ lower and the metals sharply higher on Thursday, leaving the market to now begin pricing in some more forceful action at the July 30/31 FOMC meeting, than had previously been expected. Williams was quite strident about why the Fed needs to be thinking about an aggressive easing, and came about despite the recently improving data seen in the US. Monday saw a strong Retail Sales report, ahead of Thursday’s impressive Philadelphia Fed Mfg Survey (+21 vs expectation of +5) – a 12 month high – , but the market is now pricing in a 55% chance of a 50bp cut at the upcoming meeting, where this had previously been thought unlikely to occur, instead expecting just 25bp.
The DXY is down around 0.5%, while the biggest moves were again in the commodities, on the prospect of lower rates which saw Gold/Silver rally by 1.5%/2.5% respectively, and in WTI, which fell by 3.0% on reports of an easing of tensions between the US/Iran. This came before further news of an Iranian drone being shot down by the US, causing some short covering in WTI at the end of the day.
In the FX markets, the biggest move was in Sterling, which rebounded from recent lows after a robust UK retail sales report, reduced no-deal Brexit concerns and oversold pressures, after two days of limited breaches of the January flash-crash low. All the other currencies ended higher against the dollar and the short term momentum indicators seem to point to further near term gains.
Stocks ended mildly higher but the action was elsewhere.
Friday will again see a thin calendar, but will begin with the NZ Credit Card Spending for May (exp 5.4%yy) and the Japan National CPI for June (exp 0.6%mm). The EU will look to the German PPI (exp -0.2%mm, +1.4%yy), the EU Current Account and the UK PSNBR (exp Gbp 3.2bio) for June, while the US will also be rather devoid of directional data although the Michigan Consumer Sentiment Index is due (exp 98.5) and the Fed’s Bullard will be speaking. Have a good weekend.
Economic data highlights will include:
Fri: NZ Credit Card Spending, Japan National CPI, German PPI, EU Current Account, UK Public Sector Net Borrowing Requirements, US Michigan Consumer Sentiment Index, Baker Hughes Oil Rig Count, Speech; Fed’s Bullard
Market moves, in brief:
FX: DXY 96.70 (-0.5%)
Bonds: US10Y; 2.026% (-1.21%), German 10Y; -0.310% (-6.90%), UK 10Y; 0.76% (-0.05%), Australian 10Y; 1.361% (-3.02%), NZ 10Y; 1.585% (-2.16 %), China 10Y; 3.168% (-0.97%)
Stock Indices: DJI; +0.01%, S+P; +0.36%, NASDAQ; +0.27%, EUStoxx50; -0.54%, FTSE100; -0.56%, Shanghai Composite; -1.04%,
Metals: Gold $1446 oz (+1.4%), Silver $16.35 oz (2.37%), Copper $2.71 lb (-0.22%), Iron Ore $120.87 per tonne (NYMEX) (-0.22%),
Oil: WTI $55.60 pb (-1.61%)
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