Nothing burger action overnight with DXY flat, EUR and CNY easing:
The Australian dollar drifted higher:
Gold slammed on 2%:
Oil went the other way:
As did metals:
But miners flew with iron ore:
EM stocks were firm:
High yield dumped with oil:
Treasuries were bid:
Aussie bonds were flat:
Stocks climbed to new highs:
Westpac has the wrap:
EU leaders nominated IMF head Christine Lagarde to head the ECB, replacing Mario Draghi on 31 October. This was seen as a more dovish alternative to Weidmann, who has been the leader of the hawks on the ECB council.
ECB chief economistLane said that negative rates will last “for a while”, even if “we should view this as a temporary measure”. Lane repeated that inflation is “still not yet at the objective level”, and that “if there are further negative shocks, we can do more”. Lane stressed that there needs to be a conclusion on the Brexit front, saying that if there is a no deal outcome “that will cause more disruption”.
BoE Governor Carney warned of downside risks to the economy. His statement today noted that while the central bank sees the need for rate hikes if Brexit is smooth, markets are giving more weight to a no deal scenario, and that the BoE will reassess Brexit and trade risks at the August meeting. Carney warned that the “intensification of trade tensions has increased the downside risks to global and U.K. growth”, adding that a “widespread slowdown” may require a major policy response.
FOMC member Mester said it’s too soon to make a decision on policy, in her speech on “Views on the U.S. Economy and Monetary Policy.” But added “If I see a few weak job reports, further declines in manufacturing activity, indicators pointing to weaker business investment and consumption, and declines in readings of longer-term inflation expectations, I would view this as evidence that the base case is shifting to the weak-growth scenario.” GDT dairy auction overnight saw little change in prices overall (the headline index slipped 0.4%), with WMP unchanged, SMP up 3.2%, and butter down 4.8%.
Australia: May dwelling approvals are expected to be flat. Westpac sees a 2.5% decline led by high rise approvals. May trade balance is anticipated to make a fresh record surplus of $5.3bn (Westpac fcs $5.4bn) as exports lift on higher iron ore prices.
US: Jun ADP employment is out ahead of non-farm payrolls tomorrow. Jun ISM non-manufacturing is expected to edge down from 56.9 to 56.0 – a still solid level. May factory orders are released after the preliminary durables result showed robust core capital orders.
Jun final Markit services PMI’s are released for Japan, Europe and the US.
The Lagarde appointment, if made, will be AUD bearish given it brings a new dove to the ECB’s monetary policy lever.
The rest of the forthcoming data looks AUD bullish:
- the lead on dwelling approvals from HIA was strong (though the correlation with ABS month to month is weak);
- the trade balance is likely to overshoot again given booming bulks and weak consumption;
- last month’s ADP was weak. Two will make a trend and really excite DXY bears.
Probably a bullish bias for the AUD over the next few days but that is pure guess material.