The forex complex continued its recent trends last night boosted by developments from the Fed and OPEC. DXY was up and is still firming for a breakout. EUR the opposite:
Australian dollar is back at the lows:
Gold firmed as oil was hammered again:
Metals survived as China mulls RRR cuts:
Miners popped on same:
EM stocks still soft:
Junk OK:
US curve mashed:
Giving stocks a lift:
Westpac has the data:
Event Wrap
The FOMC minutes from the June meeting revealed early discussions about QE tapering, but there did not appear to any urgency in starting the process. Although “various participants mentioned” tapering conditions to be met “somewhat earlier” than anticipated, “several” emphasized a “patient” approach. The committee’s standard of “substantial further progress” was generally seen as not having yet been met.
US JOLTS job openings rose to 9,209k in May – a record high, although that was shy of the 9325k expected, and April was revised lower from 9286k to 9,193k. The hiring rate fell to 4.1% from 4.2%, and the quit rate fell to 2.5% from 2.8% (was 2.7%). The report is consistent with skill mismatches amid pandemic dislocations, with record job openings but over 1 million unemployed job seekers.
Among European releases, German industrial production in May fell 0.3%m/m (est. +0.5%m/m), Italian retail sales rose 0.2%m/m (est. +3.0%m/m), and the French trade deficit widened to -EUR6.8bn (est. -6.1bn).
Event Outlook
Australia: RBA Governor Lowe will be speaking to the Economic Society of Australia (online), on “The Labour Market and Monetary Policy” (12.30pm).
US: The downtrend in initial jobless claims is set to continue in the week ended July 3 (market f/c: 350k). Consumer credit is expected to hold around $18.0bn in May, with vehicle loans a recent driver of strength in non-revolving credit.
Two big events overnight. The Fed minutes were out and continued the gentle hawkish turn. That it is not urgent is not relevant. Tapering is coming.
Arguably, news about the UAE and OPEC was more important:
“This is the time to maximize the value of the country’s hydrocarbon resources, while they have value,” said a person briefed on the U.A.E.’s strategy. “The aim of the investment is to generate revenue for the diversification of the economy, both for investment in new energy and, as importantly, in new revenue streams.”
The country isn’t worried about a sudden drop in demand, and expects to have buyers for its crude for decades. However, people familiar with the new tack say the country wants to pump and sell as much as it can now, when demand and prices are strong. Proceeds will help it wean its economy off oil.
“Market share is a key factor here,” said a senior U.A.E. oil executive. “We want a bigger market share, to monetize as much as we can from our reserves, especially when we have spent billions developing them.”
That is pure price war commentary which is what hit oil and sank long bonds.
It all adds to the Australian dollar bear case.
