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Loonie, Kiwi, Aussie Outperform; JPY Eases; Asians, EMS End Mixed
Summary: The Dollar Index (USD/DXY) which measures the value of the Greenback against a basket of 6 major currencies, eased 0.18% to 91.72 from 91.85 yesterday. Risk appetite settled and volatility eased after Fed Chair Jerome Powell told a US House of Representatives panel that US central bank would not raise rates on inflation fears alone. On Friday, the Dollar Index peaked at a 2-month high at 92.405. New Zealand’s Kiwi finished as best performing currency against the Greenback, soaring 0.56% to 0.7025 (0.6990). The Australian Dollar (AUD/USD) settled 0.26% higher to 0.7555 (0.7540). Against the Canadian Loonie, the US Dollar (USD/CAD) slid 0.48% to 1.2312 (1.2362). The Euro rallied 0.23% to 1.1938 (1.1920) while Sterling advanced a modest 20 pips to 1.3950 from 1.3930. Risk-on sentiment saw the USD/JPY pair rally to 110.67 (110.27). Against the Asian and Emerging Market currencies, the Greenback closed mixed. USD/CNH (US Dollar-Offshore Chinese Yuan) edged higher to 6.4800 (6.4650). USD/SGD was little changed at 1.3430 from 1.3425.
Bonds stabilised and yields settled. The benchmark US 10-year Treasury yield eased 2 basis points to 1.47% (1.49%). Germany’s 10-year Bund closed flat at -0.17%. Stocks rose moderately. The DOW closed 0.31% higher to 33,987, while the S&P 500 was last at 4,250 (4,225), up 0.42%.
Data released yesterday saw New Zealand’s Q2 Westpac Consumer Sentiment Index climb to 107.1 from 105.2. UK Public Sector Net Borrowing eased to GBP 23.6 billion from GBP 28.3 billion, bettering forecasts at GBP 24.5 billion. Japan’s BOJ Core CPI was flat at 0.0%, matching forecasts. US Richmond Manufacturing Index (June) rose to 22.0 from a previous 18.0 and beating estimates at 18.0. US May Existing Home Sales rose to an annual 5.80 million units, beating median forecasts for a rise of 5.72 million units.
On the Lookout: Economic data picks up today with the release of global Manufacturing and Services PMI’s. Australia kicks off with its latest Flash Manufacturing and Services PMI data with Japan following next. The Bank of Japan releases the minutes of its latest monetary policy meeting. Europe follows with French, German, Italian and Euro Zone Manufacturing and Services PMIs. Most PMIs are expected to match or better previous reports. The UK follows closely, releasing its Manufacturing and Services PMI reports. Canadian Headline and Core Retail Sales (April) are next in tonight’s calendar. Canadian Core Retail Sales are widely expected to fall in April with a range of -4.4—5.0% (Finlogix f/c -5.0%) from March’s +4.3%. The plunge in Canada’s sales report coincided with the country’s efforts to fight a third wave of Covid-19 infections. Finally, the US releases its Manufacturing and Services PMI data as well as New Home Sales for May (f/c to 0.87 million from April’s 0.863 million – Finlogix).
Trading Perspective: The Dollar’s sharp rise following the Fed’s hawkish shift last week was in part the result of overstretched speculative short USD positions. The latest Commitment of Traders/CFTC report (week ended June 14), which was before the FOMC meeting, saw an increase in speculative USD short bets. Overnight saw the Dollar ease further against its rivals following reassuring comments from Jerome Powell. The Fed Chair said that the recent rise in US inflation alone would not result in higher interest rates. Fed officials have differed in their views as to when they should begin taper bond purchases. And there is more Fed speak to come in the days ahead.
The next test for US inflation comes on Friday night with the release of the latest Core PCE Price Index. Data released tonight sees global Manufacturing and Services PMIs and traders will be searching for any surprises there.
Happy trading and Wednesday all.
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