Market and economic wrap: dollar pressured once again - Westpac
|Analysts at Westpac offered a market and economic wrap.
Key Quotes:
Global market sentiment:
The USD was pressured lower once again overnight, EUR/USD rising about US1 cent to a high near 1.1913, its best levels in 2 ½ years. No single news item drove the USD lower though earlier news certainly made for an unhelpful background to the day’s trading, including Trump talking down the USD in a WSJ interview and threats of US measures to restrict trade with China. The Dow scaled +22k for yet another record high, thanks to earlier strong earnings from Apple but the other US indices slipped. Fedspeak was mixed, Bullard calling the median dot plot FOMC forecast for one more hike this year “inappropriate” while Mester said further hikes will be needed. Gold and oil both posted moderate gains.
Interest rates:
US 10yr yields pushed modestly lower, from 2.27+ to 2.24/2.25 after a weaker reading from the July US ADP jobs survey.
Currencies:
EUR/USD continued to forge ahead, hitting fresh highs for this broader run up at 1.1913. The dollar bloc currencies were mild underperformers on several crosses, though NZD trimmed early weakness triggered by the weaker Q2 labour market report. Both AUD and NZD rose about US1/2 cent from their overnight lows, AUD back up near 0.8000 while NZD recovered back to 0.7450.
Economic wrap:
Eurozone producer prices for June fell 0.1%, in line with consensus expectations, weaker oil prices and a higher euro the drivers.
The monthly ADP employment survey showed a gain of +178k, below consensus at +190k but the prior month saw a hefty +33k upward revision to +191k.
Event risk:
NZ: ANZ job ads.
Australia: Interest is mainly on Friday’s RBA Statement and its forecast profiles but ahead of that the ABS trade balance and the AiG services PMI are due today. Consensus looks for a $1.8bn trade surplus, Westpac $1.4bn.
Euro Area/UK: Markit’s service sector PMIs are released across the region but the BoE meeting and Inflation Report will be the main focus. The last BoE meeting saw 3 dissenters in favour of a hike, but this meeting should produce 2, with one of the dissenters departing the MPC. Markets focused on the risks of a more hawkish slant in the wake of rate rise signalling from the Bank’s Chief Economist Haldane and Governor Carney.
US: A busy calendar Thursday, initial jobless claims, July Markit and ISM service sector PMIs and final June durable goods orders."
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