• The US dollar is heavy but within recent ranges, as the 10-year yield slips to 1.50% ahead.
• China’s CPI was kept in check by falling food prices. Producer prices accelerated more than expected, and officials are looking for ways curb thermal coal prices.
• The CRB index rose to new five-year highs yesterday and June crude is above $70.
• The US and Europe are moving to resolve trade disputes and take a more uniform position vis a vis China.
• The UK (and EU) seek to exempt financial services from the new tax reforms.
• The Bank of Canada is expected to adjust its rhetoric but is unlikely to back away from its April decision to taper and bring forward the closing of the output gap.
• Mexico’s CPI is expected to slow a little, while Brazil’s is set to accelerate.
Falling US yields weigh on the US dollar. The 10-year Treasury yield is flirting with the 1.50% mark, and the greenback is trading heavily against all the major and most emerging market currencies. European and the Asia Pacific benchmark yields are lower as well.
The JP Morgan Emerging Market Currency Index is edging higher for the fourth consecutive session. The lower yields are not doing equities much good today. Outside of China, the large equity markets in the region fell, and the MSCI Asia Pacific Index is posting back-to-back losses. The three-day rally in Europe’s Dow Jones Stoxx 600 is at risk as most sectors, but health care and real estate, are losing ground. Financials are the largest drag. US future indices are a little changed to slightly firmer.
Oil and other industrial commodities are firmer, and the CRB Index closed yesterday at new six-year highs. Gold is unable to benefit from the weaker dollar and lower interest rates. The upside momentum that had carried it briefly above $1900 fizzled.
Bannockburn Global Forex