- • The month-end demand for the US dollar seen yesterday saw little follow-through buying today. Narrow ranges prevail. The Chinese yuan strengthened to new multi-year highs and the PBOC did not appear to protest it.
- • US Trade Representative Tai talked with Chinese Vice Premier Liu but little new emerged. More importantly, the Biden administration declared the end of the engagement period with China and the start of a more competitive confrontation.
- • The US Senate bill seeking to bolster US competition with China is facing opposition as Republican senators seek to put their mark on it through amendments, which will likely delay the process.
- • ECB doves are pushing back against the hawks that want to reduce ECB bond purchases next month. Note that the euro has appreciated against the dollar since the purchases were increased in March.
- • US durable goods and revisions to Q1 GDP may be overshadowed by the weekly jobless claims ahead of next week’s nonfarm payroll report.
Dollar demand linked to the month-end gave the greenback a bit of a reprieve, helped by firmer bond yields. Some momentum players may have been forced out of the euro and yen when the $1.22 and JPY109 levels yielded. However, follow-through dollar buying has been limited, and it has come back a little softer but broadly so.
The US 10-year yield has steadied after the 1.55% level held for the second session, though the upside has been limited to a few basis points. European benchmark yields are narrowly mixed after the recent declines, encouraged ostensibly by the doves pushing back against a slowing of ECB bond purchases next month.
Asia Pacific equities were mixed. Japan, South Korea, Hong Kong, and Taiwan markets eased, while China, Australia, and India rose. The Nikkei fell for the first time in six sessions, led by chemical companies and banks, amid concern that the formal emergency will be extended for a few more weeks in at least Tokyo and Osaka. Of note, the easing of social restrictions sent the Philippines stock market up 5.1% to bring the three-day advance to 8%, and lifting the peso the most among emerging market currencies today. European shares are edging higher, and the Dow Jones Stoxx 600 is trying to extend its advance for a sixth session, but this week’s gains have been minor, less than 0.3%. US futures are a little heavier.
Industrial commodities, including iron ore and steel rebar, continued their downside correction, while lumber prices fell for the third session in the US yesterday. Oil is consolidating in narrow ranges, with the July WTI in about a 30-cent range on either side of $65.80. Gold stalled yesterday after reaching almost $1914, the highest level since mid-January. It is holding above $1890, but the upside momentum has not been rekindled.
Bannockburn Global Forex