- • The US dollar is strengthening today as yields rise and equities slip.
- • The PBOC announced usage limitations on cryptocurrencies because they do not fit the criteria of “real currencies” as they described. It may be perceived that China is taking steps to maintain its monopoly of its digital yuan. However, crypto being used as actual money has yet to be shown.
- • Europe will allegedly cease the ratification process of the Comprehensive Agreement on Investment that was reached with China last year despite several years of negotiating. Europe reportedly is asking for the repealing of the retaliatory sanctions as a pre-condition to continue the treaty’s ratification.
- • This week the US Senate commenced debate on the Endless Frontier Act, a $100 bln five-year program to fund technology in order to contend with China, as is being pitched. The bill advanced with an overwhelming majority in the Senate, where further measures will be discussed and combined with it prior to the legislation being sent to the House.
A setback in commodities and technology are roiling equity markets today. The inability of US equities to sustain yesterday’s rally provided an initial headwind to trading in the Asia Pacific region today. Hong Kong and South Korea markets were closed for holidays, but most of the bourses fell, led by Australia, where the market tumbled nearly 2%, the most in almost three months as the drop in mining and energy took a toll.
Europe’s Dow Jones Stoxx 600 gapped lower, and information technology, materials, and energy were the largest drags. US equity futures are seeing follow-through selling as well. Bonds are not drawing a safe-haven bid.
The 10-year US Treasury yield is up a couple of basis points to 1.66%, while European yields are mostly 2-3 bp higher.
The dollar is finding a bid after the downside momentum stalled in North America yesterday. The Antipodeans and Norwegian krone are the weakest. The Canadian dollar is faring the best of dollar bloc. Emerging market currencies are also mostly weaker, snapping a four-day advance in the JP Morgan Emerging Market Currency Index.
Gold is backing off after reaching $1875 yesterday. It looks poised to return to the $1850 area.
July WTI is near $64 after briefly poking above $67 yesterday.
Bannockburn Global Forex