Global market watch - 24th June 2019
The Greenback is trading under pressure as market participants now expect two Fed rate cutes this year, with bond traders betting on 0.25% cuts in July and September at the moment, which has supported risk tolerance but has weighed on the Dollar and, ironically, increased expectations of a potential global economic slowdown as well. Historically, every time the FOMC has cut rates whilst the domestic Unemployment Rate has been under 4.00% as it is now a recession has followed. While equities have been supported, the 10-year Treasury Bond yield touched a fresh November 2016 low on Thursday morning, after the Fed meeting on Wednesday afternoon, which is notable as this was right before the beginning of the two-year gradual tightening cycle that ended in December just six months ago. The Buck is trading at its fresh three-month low versus the Euro today, dropped against the Loonie as WTI Crude Oil touched its 25-day high this morning, trading close to its 3 January flash crash low in its pairing with the Yen on Friday morning, softened to its one-month low in narrow ranges against the British Pound today, its fresh 5.5-monht low versus the Swiss Franc this morning, its 13-day trough with the Aussie Dollar today along with its 15-day low against the Kiwi today, managed its nearly five-day peak with the Mexican Peso due to broad market uncertainty, along with its five-day high with the Chinese Yuan on current broad US-China trade uncertainty. On the data front this week for the US, we have nothing for today, US HPI MoM coupled with the CB Consumer Confidence tomorrow morning followed by a Fed Chair Powell speech at the Council on Foreign Relations early afternoon, Durable Goods Orders MoM, Goods Trade Balance, along with Crude Oil Inventories tomorrow morning, Final GDP QoQ Thursday morning, followed by the Core PCE Price Index MoM on Friday morning. There is also an OPEC Meeting tomorrow morning along with a G20 Meeting beginning on Thursday.
The Loonie ticked up versus the Buck this morning on USD weakness combined with WTI Crude Oil trading at its fresh 25-day high this morning. EURCAD is trading at its one-week high whilst GBPCAD is near its two-day peak from the last session on Friday morning. Increased risk tolerance resulting from lower US interest rates is positive for the Loonie in the short-term, but the broad uncertainty in financial markets coupled with fears about global trade amid White House tariffs are potential risks for the commodity group in general or the long-term. OPEC is scheduled to meet tomorrow, and Canadian Wholesale Sales MoM are on tap for the morning, the G20 Meeting starts on Thursday morning, with the key Canadian GDP MoM figure on Friday morning along with the RMPI/IPPI MoM figures simultaneously followed by the Bank of Canada (BoC) Business Outlook Survey also.
The Euro is trading broadly higher against most of its rivals including its fresh three-month high versus the Dollar along with one-week respective peaks against the CAD and Sterling. The single currency is benefitting more from direct USD weakness rather than positive factors of its own at the moment. While traders are pricing in two rates cuts by the Fed this year at the moment, market participants suspect easing from the ECB which could put their key Main Refinancing Rate officially negative in the foreseeable term making the key Eurozone Flash Estimate CPI YoY number scheduled for this Friday all the more important. There are precedents for major central banks to have negative interest rates set by the BoJ and SNB right now. In addition to the key EU Flash Estimate CPI YoY on Friday morning, German Ifo Business Climate was on target at 97.4 this morning, the German GfK Consumer Climate number is scheduled for Wednesday, German Preliminary CPI MoM along with Spanish Flash CPI YoY on Thursday morning.
The Pound rallied to its one-month high versus the broadly softer Greenback this morning, has stayed close to its two-day high versus the CAD on Friday, but did fall to a new one-week trough with the broadly firmer Euro this morning. Market participants remain concerned about the potentially increased probabilities of a no deal Brexit if the frontrunner to be the next UK Prime Minister, outspoken Brexiteer Conservative MP Boris Johnson, is elected by his Tory peers. There is also higher potential for general election as the government is projected to have only a small majority. If somehow a general election resulted in a Labour Party victory, this could present further concerns while also clouding the already confused Brexit landscape more. UK CBI Realized Sales are scheduled for tomorrow morning, the key Inflation Report Hearings follows High Street Lending on Wednesday, Nationwide HPI MoM on Thursday early morning, with the key Final GDP QoQ release Friday morning.
The broadly softer Dollar is trading close to its fresh 3 January flash crash low versus the generally firm Yen this morning, dropped to a fresh 5.5-month low with its safe-haven cousin the Swiss Franc as well, while it also managed a 13-day trough with the Aussie Dollar as firmer equity markets on lower US interest rates supported limited risk appetite despite the broad uncertainty in markets at the moment. The key BoJ Monetary Policy Meeting Minutes are due this evening along with SPPI YoY followed by the BoJ Core CPI YoY figure overnight. The Reserve Bank of New Zealand (RBNZ) monetary policy meeting is on tap for tomorrow night with no change expected after the RBNZ just cut rates last month