Markets continue to be driven by undulations in the trade/tariff melodrama. The USDCNH rallies back towards weekly high, which again leads a broader USD bid across the G-10. The GBP is marginally underperforming after Trump’s warning on U.S./U.K. trade deal.
The U.S. equity futures retrace entire overnight rally, the E-mini S&P futures back below 2,800. The downside momentum has given an added push after reports of China SWF looking to incest domestically for the first time. European equity markets hold small gains after fading from the open, mining stocks underperform due to concurrent move lower in metal futures.
Core fixed income was well supported from the open, the U.S. Treasury/Bund spread widens as an upside stops are run in bund futures, gilts rally on Trump comments.
In the key headlines for the European session:
- China sovereign wealth fund (size $941b) wants permission to invest in domestic stocks and bonds for the first time.
- Trump says Theresa May’s soft Brexit plan likely to kill off U.S. trade deal.
- BOJ may project missing 2% inflation target for 3 more years at the next meeting.
- China June Trade Balance: $41.6b vs $27.7b estimate; Imports 14.1% vs 21.3% estimate; Exports 11.3% vs 9.5% estimate
- China June M2 Money Supply 8.0% vs 8.4% estimate; New Yuan loans 1.84t vs 1.54t estimate; Aggregate Financing 1.18t vs 1.4t estimate.
The U.S. session takes over the European market as investors have little in terms of Economic Data with only the U.S. University of Michigan Consumer Sentiment which is expected to stay as it is for the month.
However, with the week coming to an end, most of the news coming from the U.S. session comes from the meetings and speeches that are scheduled for today. First off is the news conference held by U.S. President Donald Trump and U.K. Prime Minister Theresa May, where the former is visiting the U.K. as part of his tour. There is also the Federal Reserve releases semi-annual monetary policy report to the Congress.
In terms of speakers, there is the Bank of Atlanta Fed President Raphael Bostic (voter, Neutral) and the Bank of England Deputy Governor for Financial Stability Job Cunliffe.
The Bloomberg Dollar Spot Index headed for its best week in a month before the Fed releases its semi-annual Monetary Policy Report. The pound extended its recent slide after President Trump said Theresa May’s plans for a soft Brexit would likely kill off hopes of a trade deal with the U.S. Model names drove the price action in the major currencies, while European equities advanced along with bonds.
EUR/USD – Medium-term picture stays bearish on closes below the 55-DMA, ECB June-meeting high eyed; close above has game-changer potential; until then, bulls need 21-DMA (1.1652) to hold on a closing basis to keep conviction.
GBP/USD – Looking for direction; a close above June 22 high needed to establish upside momentum; to form a DeMark buy countdown Friday.
USD/JPY – Has best two-day run in 10 months as bullish bias established; nine-day RSI rises to levels associated with corrective pullbacks or sideways trading; close below 111.40 neutralizes momentum.
EUR/JPY – May double-top caps for now; failure could see mean reversion; 130.36 pivotal support; at bar 6 on daily DeMark sell setup.
AUD/USD – Tweezer Top formed Tuesday keeps the pair under pressure; 55-DMA defines upside.