- • The US dollar is better bid at the start of the North American session, but it remains in well-worn ranges.
- • The Chinese yuan is softer as additional measures, like boosting the outbound foreign investment quota and the issuing of dollar-bonds by policy banks.
- • Some observers play up a possible thaw in US-China relations. We are skeptical.
- • EMU and UK’s final service and composite PMIs were stronger than expected suggesting the recovery is accelerating after the Q1 contractions.
- • The Fed announced it would be gradually selling the corporate bonds bought last year. It is not a policy signal but a technical move.
- • Last month’s US auto sales were weaker than expected, and it could have restrained May’s retail sales. Shortages and slower deliveries were likely the culprit.
- • The ADP and weekly jobless claims may overshadow the final PMI and ISM services ahead of tomorrow’s national report.
Market participants appear to be biding their time ahead of tomorrow’s US jobs report as they digest recent developments. The dollar is firmer, equities are mixed, and benchmark bond yields are a little firmer. China and Hong Kong shares continue their recent underperformance, while most of the large markets in the Asia Pacific region edged higher. Europe’s Dow Jones Stoxx 600 is easing from record highs. The utility and materials sectors are the largest drags. US futures are on the downside by around 0.25%.
US yields and the dollar did not sustain the increase inherited by North America yesterday, but the 10-year is testing 1.60% today from below, and European yields are 1-2 bp higher.
For its part, the dollar has come back bid but in well-worn ranges. The Antipodeans and the Scandis are the softest, surrendering about 0.25% through the European morning. Emerging market currencies are also mostly lower, led by the Turkish lira, despite softer than expected May CPI (16.59% year-over-year down from 17.14% in April) and central and eastern European currencies. The heavier NOK tone is not a reflection of oil prices, which are firmer, with the help of a reported drawdown of 5.3 mln barrels by API.
Other industrial commodities are firm. Iron ore has a five-day advance in tow, and steel rebar has risen in four of the past five sessions. Copper is posting is edging higher for the first time this week. Yesterday, lumber prices snapped a six-day 12% slide. Gold has already traded on both sides of yesterday’s range, and if its 0.8% decline is sustained, it would be the largest loss in three weeks. A break of $1882 would likely signal the end of the rally that began at the end of March near $1678.
Bannockburn Global Forex