US Jobs and OPEC+ Day
Today’s Highlights
• The US dollar has extended its gains ahead of the employment report, which has disappointed in the last two months. The dollar’s advance is 4-5 weeks old and is stretching technical indicators.
• With three weeks before opening ceremonies, some Japanese cities have reportedly stopped take reservations for vaccines as they are running out of supply. The percentage of Japanese that have been fully vaccinated is near 12%, the lowest in the G7.
• The new EU rotating president is from Slovenia, which has been drifting toward the illiberal position of Hungary and Poland, and tensions with Brussels seems set to rise.
• OPEC+ looked as if they were reaching an agreement to boost output by 400k barrels a day starting next month for the rest of the year. This seemed unlikely to address the supply/demand mismatch that has driven oil prices to multi-year highs. However, the UAE balked and a decision was postponed until today.
• Commodity prices remain firm and the CRB Index has risen for the past ten sessions coming into today. It stands at its highest level in seven years.
The US jobs report and OPEC+ decision are awaited. The dollar remains bid. Only the yen and Canadian dollar are showing a hint of resilience, though, on the week, the Scandis and dollar-bloc currencies are off between around 1-2%. The greenback is also firmer against the emerging market currency complex, and the JP Morgan index is off for the sixth consecutive session. The Brazilian real is the strongest currency in the world last month and is leading this week’s losses with a 2.25% drop coming into today.
Equity markets are mixed. In Asia Pacific activity, Japan, Australia, and India, of the large markets, gained, but the regional index fell on the week. European shares are up and today’s gains, if sustained, point to a small weekly gain. US futures are firm.
The US 10-year yield is hovering around 1.44%. It is off for the fifth consecutive session after finishing last week a little above 1.52%. The two-year yield is about a single basis point lower for the week coming into today’s session. Recall that it had closed May near 14 bp and ended June near 25 bp. European yields are off 1-3 bp today and mostly 4-6 bp lower on the week. However, Australia, which has put cities that account for around 80% of the country’s population in new lockdowns, saw its 10-year yield fall four basis points to bring the week’s decline to nearly 11 bp (to about 1.47%).
Gold is trading firmly after recovering from a test on $1750 earlier this week. It is now near $1782, just below the high of the week set Monday near $1786. WTI closed above $75 a barrel for the first time in three years yesterday as the OPEC+ deal to boost output by 400k barrels a day for the last five months of the year ran into a glitch as the UAE’s wanted a new baseline for its quota given its expanded capacity. The CRB Index begins today after advancing for the last ten consecutive sessions to new seven-year highs.
Marc Chandler
Managing Director
Bannockburn Global Forex
www.bannockburnglobal.com
