Dollar Surge Stalls
• After a powerful surge last week, the US dollar has begun the new week on a softer note against the major currencies.
• China left key lending rates unchanged, suggesting officials are not overly concerned about the rising price pressures.
• Equity markets turned up after Asia extended last week’s losses.
• French regional elections seemed to have little impact on investors. The collapse of the Swedish government also had minimum impact.
• The Iranian election makes a nuclear deal somewhat less likely, keeping Iranian oil off the market longer.
• Speeches by Fed officials will be scrutinized, with non-voting hawkish regional presidents Bullard and Kaplan speaking today, while NY Fed President William, with a permanent vote on the FOMC, is seen to be more dovish and could be one of the five officials that still do not think a hike until after 2023 would be appropriate.
Pressure on equities seen last week carried over into Asia and Europe today. The MSCI Asia Pacific Index fell for the fourth consecutive session, led by more than a 3% decline in the Nikkei. Australia, Taiwan, and Hong Kong bourses fell by more than 1%. European equities opened lower, but have turned higher. The Dow Jones Stoxx 600 is up about a third of a percent in late morning turnover. US futures have found some bids and are up around 0.5%.
The US 10-year yield is soft at 1.43%. The 30-year yield, which initially pushed below 2.0% for the first time in six months, is now holding above it. European rates are narrowly mixed.
The dollar, which rallied strongly in response to the FOMC, is softer to start the new week. Led by the Antipodeans, sterling, and the euro, the majors are mostly up around 0.2%-0.4% against the greenback. The Japanese yen and Swiss franc are the laggards rising less than 0.10%. Asian emerging market currencies and the Russian ruble are lower, while European currencies, the Mexican peso, and South African rand are posting modest gains. The JP Morgan Emerging Market Currency Index is trying to snap a six-day slide.
Gold, too, is posting its first gain in seven sessions near $1785. Oil is firm, with the July WTI, around $72. Copper remains heavy after losing almost 8.5% last week. Steel rebar and iron ore fell in Shanghai earlier today.
Bannockburn Global Forex