It has been a volatile session on Tuesday, but at the end of the day the US$ was a little stronger and stocks around 1% lower after various Fed officials pushed back on market expectations – and increasing presidential pressure – to cut rates by 0.5% at its next meeting. Until then, the dollar had looked heavy, stocks were firm and Gold was at a 6 year high (1439 oz). All this quickly turned around, with markets heading sharply into reverse, generally chopping sideways ever since, and with traders now looking increasingly towards this weekend’s G20, and the meeting between Trump/Xi.
Of particular interest in the FX markets, Sterling hit its highest level in a month on Tuesday but then headed into reverse, weakening sharply, as the risk of a no-deal Brexit stemming from the Conservative Party leadership contest, weighed it down.
In other markets, WTI is 1.7% higher after the API Weekly Crude Oil Stock Inventory report suggested that US crude stockpiles continue to shrink, a bullish signal for a market that has been beset by economic jitters and an uncertain standoff in the Middle East. Bond yields remain under pressure, which won’t help either the US$ or the Euro. The German 10-year yield hit a new record low at -0.33% while US 10-year yield is below 2%, currently at 1.985%.
Looking ahead, Wednesday gets under way with the RBNZ Meeting at which there is the outside chance of a rate cut, although this is more likely to be the case at the August meeting. If rates stay on hold today, as generally expected, the Press Conference and Statement will be in focus. Asia is then pretty much empty, with Europe not a lot better, with just the German Consumer Confidence (exp 10.0), the UK Inflation Report Hearing and speeches from the BOE Governor Carney and the ECB’s Mersch on the agenda. The US will take guidance from the May Durable Goods Orders (exp +0.2%mm), the April Wholesale Inventories (exp +0.5%) and the May Goods Trade Balance. Note that the EIA Crude Oil Stocks Weekly Change will also be released late in the day. As we said yesterday, with only second-tier US economic data this week, direction will most likely to be driven by headlines on trade issues and Iran, as well as month and quarter-end flows, with traders sitting on their hands ahead of the weekend G20 meeting..
Economic data highlights will include:
Wed: RBNZ Meeting/Interest Rate Decision, German Consumer Confidence, UK Inflation Report Hearing, Speeches; BOE’s Carney/ECB’s Mersch, US Wholesale Inventories, Durable Goods Orders, Goods Trade Balance, EIA Crude Oil Stocks Weekly Change
Market moves, in brief:
FX: DXY 96.18 (+0.18%)
Bonds: US10Y; 1.987% (-1.47%), German 10Y; -0.33% (-7.5%), UK 10Y; 0.795% (-2.37%), Australian 10Y; 1.292% (-0.96%), NZ 10Y; 1.535% (0.00 %), China 10Y; 3.25% (-0.59%)
Stock Indices: DJI; -0.67%, S+P; -0.95%, NASDAQ; -1.51%, EUStoxx50; -0.32%, FTSE100; +0.08%, Shanghai Composite; -0.87%,
Metals: Gold $1423 oz (+0.27%), Silver $15.36 oz (-0.50%), Copper $2.7355 lb (1.11%), Iron Ore $107.93 per tonne (NYMEX) (-0.97%),
Oil: WTI $ 58.72 pb (1.71%)
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