The USD traded softer heading into the London interbank open, retracing from the gains seen yesterday following a near 10 bp spike in the 10-year US T-note yield, which touched a one-month high at 2.143%. This came as the S&P 500 and DJIA hit record highs. The narrow trade-weighted USDIndex ebbed to a 96.89 low earlier, though has remained above yesterday’s one-week low at 96.80, which was seen ahead of the perkier than expected core CPI and jobless claims data out of the US. EURUSD mirrored this price action in rising to an intraday high at 1.1275 and remaining shy of yesterday’s eight-day high at 1.1285. USDJPY settled to around 108.30-35 after printing a high at 108.61. The biggest mover has been the AUDUSD, which reestablishing a footing over 0.7000 and has key resistance at last weeks high around 0.7025.
While the Congressional testimonies of Fed Chair Powell this week signalled a 25 bp rate cut at the FOMC later this month, leaving the door open to a more aggressive policy action, a couple of other Fed speakers yesterday were a little less sanguine over the need for more stimulus. One thing to note is rising speculation in the markets that the Trump administration might intervene in the currency markets and weaken the USD as a means to leverage up its negotiating position in trade talks with China and other major economies. Another focus is the upcoming Q2 corporate earnings season, which will get into gear next week with “show and tells” from the banking sector. Trade warring and slowing global growth have set the scene for a possible earnings recession, which could catalyze a risk-off phase in global markets.
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Head Market Analyst
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