Typically, a week with BOJ, FOMC and ECB news would be cause for some excitement, but the current central bank apparatus is atypical.
The BOJ passed without fanfare as they continue to play the yields vs. the numbers game. The FOMC has so many new programs in play it’s doubtful they’ll follow with anything new. Besides, since the US economy is still contracting and the bottom trench is not apparent, the Fed is probably not ready to shift its focus to medium-term policy. The ECB could do something, though it’s not clear what they would do or why they would do anything as the fiscal integration story continues to be the main narrative.
Hence the reason FX markets are stuck in neutral today ahead of the two leading central banks that drive global currency policy.
USDCNH spot has been confined to a 7.08-7.10 range, largely following broad USD moves, though the RMB index continues to trade soft. BoC disappointed the market by not injecting longer-tenor liquidity, while the global risk recovery resulted in yields rallying. The market appears to still be in the mood to chase returns.
It was a pretty mixed day in Asia shares, dotted with profit-taking and some signs of month-end rebalancing holding the bullish moment in stocks in check today. After Monday's unaccustomedly optimistic start to the week, traders are taking a breather ahead of the FED and ECB. Investors were better sellers on the day in Asia, but far from painting the ticker tape a glossy red.
So far, the song remains the same in the dislocated first contract. Front-month WTI is down 14.6% this morning and 35.3% for the week to date to $10.87. Front-month Brent is much more contained, down 4.6% at $19/barrel. Oil-sensitive currencies are trading mixed but are not overly weak. Quickly filling oil storage in the US and technical issues in the ETF market where some long-only oil funds continue moving out of the front end of the futures curve is leaving WTI in super contango. But it will merely peter out as open interest and what little scalping participation is left then shifts to July or August. But the quirky WTI front-month move is having little to no discernable impact on risk sentiment.
With the market so close to the high for the year on Friday and at yesterday's open, gold momentum waned, trying to paint a new yearly high watermark, which triggered consolidation and profit-taking, which has extended through to today’s Asia session as risk remains stable.
But London macro investors have been typically better buyers of gold than their Asia counterparts so we could see some dip buying into the London open. But the general trend has been lower throughout the Asia session.
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Sometimes you have to throw conventional wisdom out the door and just let the good times roll