Much of Monday has seen the US$ recover its losses from Friday, with the Euro leading the way, under pressure because of the threatened split in the German Coalition. This has been partially turned around, late in the US session, because an agreement on migration policy has been hammered out between Angela Merkel and the Interior Minister, Seehofer, to reach a compromise agreement which has allowed the Euro to recover from its lows. Elsewhere, risk aversion dominated Monday trade, beginning in Asia, with Chinese stocks down another 2.5%, and then spreading to Europe. The increasing threat of trade tariffs has been the driving force, underpinning the dollar and pushing European stocks lower, and with China’s retaliation to the US imposition of sanctions set to come into effect later this week, it would seem that the trend is set to continue.
In other markets, the currencies were mixed, although the Aud and Kiwi remain heavy – weighed down by the trade concerns, – while US stocks have ended the day about 0.2% firmer. Gold continued its downward slide – possibly giving us a hint of a stronger US$ ahead -, while oil has paused for breath after its strong run higher, and WTI currently sits at 74.00pb.
The main event on Tuesday will be the RBA Meeting, at which no change is expected to policy, so all eyes will be on the Statement. This is likely to be relatively upbeat but the RBA would like a lower currency so we may see a bit of volatility. Before the RBA, the Australian Building Permits for May will be released (exp +1.0%mm, 9.9% yy). Europe will look t the UK Construction PMI and the EU Retail Sales (exp 0.1%/1.4% mm/yy) and PPI (0.4%/2.4% mm/yy), while the US will see the May Factory Orders and Total Vehicle Sales. Kiwi traders should note that the GDT Price Index will be released at around lunch time in London.
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