Dollar Remains Bid as Virus News Stream Worsens

  • The World Health organization said the worst of the pandemic is still to come; the dollar continues to benefit from risk-off sentiment
  • Fed Chair Powell warned of extraordinary uncertainty ahead; June Chicago PMI will be the data highlight; Colombia is expected to cut rates 50 bp to 2.25%
  • German lawmakers are moving to defuse the challenge to the ECB’s QE program; UK Prime Minister Johnson is going full FDR; we see heightened downgrade risks for the UK
  • China approved the controversial security law for Hong Kong; China official PMIs surprised on the upside; Japan IP and employment data continued to deteriorate

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US Dollar Weighed Down by Dovish Fed Governors

Dollar Begins the Week Under Pressure Again

  • The virus news stream remains negative; pressure on the dollar has resumed
  • The US economy is taking a step back just as Q3 is about to get under way; there are some minor US data reports today
  • UK Labour leader Starmer overtook Prime Minister Johnson in the latest opinion poll; Macron’s party did poorly in French local elections
  • French and German leaders meet to discuss the planned EU pandemic rescue package; UK and EU begin their “intensified timetable” for Brexit negotiations
  • Japan reported May retail sales and department store sales; China industrial profits rebounded nicely to 6.0% y/y in May

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Dollar Steady as US Virus Numbers Worsen

  • The continued rise in infection rates amongst many states in the US led to yet another record number of registered cases; the dollar continues to benefit from risk-off sentiment
  • The Fed ordered the largest US banks not to increase dividends or resume stock buybacks through at least Q3; yesterday’s jobless claims data are worth a mention
  • A major indexing event could add to US equity market volatility; Mexico cut the overnight rate by 50 bp to 5.0% yesterday
  • ECB reported M3 data for May; Turkey kept rates on hold yesterday at 8.25%; Japan reported June Tokyo CPI

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Dollar Firm as Risk-Off Sentiment Persists

  • Higher infection numbers in the US and other countries continue to fuel risk aversion across global markets; the IMF released more pessimistic global growth forecasts yesterday
  • The US has rekindled trade provocations against China through Huawei; weekly jobless claims will be reported; regional Fed manufacturing surveys for June will continue to roll out
  • Fitch cut Canada’s rating by a notch to AA+ with stable outlook; Mexico is expected to cut rates 50 bp to 5.0%; Brazil central bank releases its quarterly inflation report
  • The ECB announced a new euro liquidity facility for central banks outside the euro area; its account of the June meeting will be released
  • Turkey is expected to cut rates 25 bp to 8.0%; Philippine central bank unexpectedly cut rates 50 bp to 2.25%

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Dollar Firm as Risk-Off Sentiment Returns

  • Risk-off sentiment has picked up from reports that the US will impose new tariffs against the EU; there’s also been a messy set of headlines regarding the virus contagion outlook in the US
  • The IMF will release updated global growth forecasts today; the dollar is benefiting from risk-off sentiment; another round of fiscal stimulus in the US is in the works
  • Brazil announced a slew of new easing measures to improve liquidity conditions in local credit markets; Mexico reports mid-June CPI
  • Germany’s June IFO survey came in on the stronger side of forecasts; Austria issued the second 100-year bond in its history and it was very well received
  • Czech Republic is expected to keep rates steady at 0.25%; Hungary surprised with a 15 bp cut yesterday
  • The BOJ’s initial emergency response to the pandemic appears to be over; RBNZ delivered a dovish hold; Thailand kept rates steady at 0.5%, as expected

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Dollar Remains Under Pressure as Markets Celebrate Strong June PMIs

  • Global equities took a sharp but short-lived hit from what appears to have been a misinterpretation of US trade advisor Navarro’s comments about China; the dollar remains under pressure
  • The regional Fed manufacturing surveys for June continue to roll out; Brazil central bank releases its minutes
  • Eurozone and UK flash PMI readings for June were better than expected; Hungary is expected to keep policy steady
  • Japan and Australia June PMI readings improved

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Sterling Pounded Ahead of BOE Decision

  • The second wave infection narrative is gaining ground; the dollar has gotten some traction from building risks
  • Fed Chair Powell broke no new ground on his second day of testimony before Congress
  • Regional Fed manufacturing surveys for June will continue to roll out; weekly jobless claims will be reported; Brazil cut rates 75 bp last night, as expected
  • ECB allotted EUR1.31 trln in its latest TLTRO operation; BOE is expected to increase its asset purchases by GBP100 bln
  • SNB and Norges Bank kept rates steady, as expected; however, Norway delivered a hawkish hold
  • Antipodean data disappointed overnight; Indonesia cut rates 25 bp, as expected

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Dollar Firms as Risks Start to Pile Up

  • Geopolitical risk is back in play with at least three sources of tension; the dollar has gotten some traction from the building risks
  • Powell delivers the second part of his semi-annual report to the House; May retail sales report was a shocker
  • Canada reports May CPI; Brazil is expected to cut rates 75 bp to a record low 2.25%
  • Reports from Germany suggest that the €750 bln recovery plan will be agreed to next month; UK’s May CPI and PPI data confirm the BOE’s leeway to ease tomorrow
  • Japan reported weak May trade data; inter-Korea and Sino-Indian tensions remain high

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Dollar Suffers as Stimulus Efforts Boost Market Sentiment

  • Market sentiment reverse sharply to the positive side due to several factors; as a result, the dollar has suffered
  • The Fed beefed up its support for the corporate bond market; all eyes are on Fed Chair Powell as he delivers his semi-annual report to the Senate today
  • The Trump administration is reportedly preparing a large infrastructure bill; May retail sales will be the data highlight
  • Comments from UK and EU officials have sparked optimism about Brexit talks; UK reported mixed labor market data
  • Regional tensions in Asia have been overlooked by the markets; BOJ kept rates on hold but boosted its pandemic loan program; RBA released its minutes

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