See the latest Australian dollar analysis here:
The forex complex enjoyed some more relief overnight as DXY weakened and everything followed suit in usual fashion. EUR lifted:
The Australian dollar finally dead cat bounced:
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Oil blasted higher after days of Wall Street begging:
Metals were mixed:
Miners, EM and junk all up:
US yields took off with oil:
Stocks too, led by growth:
Westpac has the wrap:
There was no major data to report.
Australia: ABS Weekly payroll jobs for the week ending June 3 will provide insight into the response to the early stages of Sydney’s lockdown.
Euro Area: The ECB will deliver its July policy decision. President Lagarde has signalled that this meeting will be significant. In light of its new monetary policy framework, the Governing Council is set to review and recalibrate its communication style and its forward guidance. This may also include a decision around the future of emergency policy instruments, namely the Pandemic Emergency Purchase Program (PEPP). Consumer confidence is likely to advance again in June on the continued reopening; the spread of the delta variant may serve as a headwind in coming months (market f/c: -2.6).
US: June existing home sales will provide an update on the state of the US housing market – turnover has moderated in recent months on lower inventory and higher prices, but building activity has remained robust (market f/c: 1.7%). Declining initial jobless claims are likely to be one of the main drivers of the June leading index (market f/c: 0.9%). The market is looking for initial jobless claims to edge down to 350k in the week ended July 17, with the downtrend likely to accelerate as unemployment benefits roll off. The Chicago Fed activity index indicates that growth is firmly above trend, but that pace will begin to moderate as we move from recovery to a more balanced expansion (market f/c: 0.3). The July Kansas City Fed index will provide a timely update on the status of bottlenecks and upstream price pressures (market f/c: 25).
Not much to add from me. The market is still at war with itself over whether or not sliding growth is going to impact asset prices. I will only add that the data backing a growth scare is not yet here so when it does arrive we will then test the market’s mettle if it has not been discounted in advance.
The other factor acting on the AUD is the local lockdowns which will surely begin to work soon so we may see some more short-term reprieve for the currency. JPM:
Terrible retail sales in Australia for June, unsurprising given the lockdowns but certainly worse than expected. The price action in the USD is very bullish and its surprising that high beta currencies weren’t able to rally back yesterday as equities recovered Tuesday’s losses. It tells me that there is something more sinister going on and you don’t have to look much further than the rates market for supporting evidence for that. The growth narrative is being challenged right now and it’s hard to see what makes yields bounce and in turn the USD be able to sell off. I am keeping an eye on RM flow. They have been USD sellers with us in the last month since the Fed turned hawkish but were finally buyers yesterday. I’ve been running short USDJPY and have largely missed this USD rally vs high beta. I’m looking to sell the next rally in AUDUSD and NZDUSD up to 0.7350and 0.6950 but if we start to see a few consecutive sessions of RM USD purchases then I will be less price sensitive.