Welcome to my daily Markets Musings.
You’ll see things are different from now on. That’s because the full note was approaching 2,000 words some days and I’m breaking it up into a number of reports on the Axi Blog each day now.
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Market Summary (7.40 am Friday August 10)
It is almost here folks.
The day USD bulls have been waiting for, the break of the range and the move to higher levels. We aren’t there yet but at 95.60 the USD index has had a strong surge and is sitting right at the top of the recent range. A close above this level to end the week – maybe CPI will be the catalyst – will set the USD on its way. Probably toward 100, maybe above.
The corollary of the USD move in DXY terms is a big fall in Euro of 0.7% to 1.1532, a drop of 0.4% for the Pound, and a massive 1.9% fall for the New Zealand dollar as the combination of USD strength and overt dovishness from the RBNZ yesterday knocked the Kiwi down to 0.6615 this morning. The Aussie has lost 0.7% in sympathy with these moves and is at 0.7377 but the Yen and CAD have resisted losing just 0.1% and 0.15% respectively with USDJPY and USDCAD sitting at 111.06 and 1.3038.
That renewed USD strength, this renewed strength, will again roil markets. So, watch this space.
Elsewhere stocks in the US drifted lower overnight. Nothing too big and not too much of a catalyst though the PPI at +0.3% for the core measure is another sign US inflation is rising and the Fed is likely to hike twice this year. At the close the S&P 500 is off 0.14% at 2,853. A move to 2,823 support might be in the offing based on the last three days candles.
The Dow gave back 0.3% to close at 25,509 and the Nasdaq gave up earlier gains to finish down 0.03%, just in the red for a close at 7,467. In Europe the FTSE went ex and fell 0.45% while in Germany the DAX fell 0.43% and in France the CAC was largely unchanged.
Here at home the ASX200 and SPI had a run at the range top yesterday. It hasn’t broken yet but SPI traders are still kind of optimistic having added 10 points overnight.
On commodity markets Oil was again lower but with smaller falls after the previous night’s big 3%+ loses. WTI is down 0.33% to $66.71 while Brent is off 0.4% to $71.99. Both contracts were off their lows but seemingly worried about trade and demand. Something the WTO suggested overnight is warranted.
Gold has held up very well in the face of the USD move. It’s at $1212 down just 0.1%. Copper is higher too up 0.4% to $2.769 for HGc3. Iron ore is higher as is Bitcoin which bounced nicely from the full round trip support. It’s at $6,495 up 2.86%
US 10’s are at 2.93% while the 2’s are 2.65%. The curve is at 27.5 points.
On the day its CPI tonight in the US which is a monster number overhanging everything. The market is expecting 0.1% and 2.9% for headline and 0.2% and 2.3% for core. But before that we have plenty to get our teeth into. Japanese GDP for Q2 is out, the RBA releases its quarterly Statement on Monetary Policy, China releases loans data and money supply growth, and the UK has a raft of data out including Q2 GDP, manufacturing, inventory, and industrial production data. And of course Canada releases its jobs data.
Have a cracking day and a great weekend.
Macro Stuff that affects everyone and everything – either today or eventually
Have a great day's trading.
Chief Market Strategist
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US equities continue to welcome any high-risk event being put in the rear-view mirror – especially when rates markets look prime to consolidate lower