US Stocks

NZD, AUD, YEN Push USD Lower, Risk-On Pulls Wall Street Higher

Summary:  Risk assets and currencies continued their march higher boosted by ongoing hopes for a swift economic recovery. The Australian Dollar extended its 8-day rally to finish at 0.7020 from 0.6967. The Kiwi (NZD/USD) jumped 0.85% to 0.6560 (0.6505) after New Zealand’s Prime Minister Jacinda Ardern declared a “win” against Covid-19. New Zealand will ease out of complete lockdown measures imposed a month ago to stem the spread of Covid-19. The Euro finished little-changed at 1.1292 (1.1288 yesterday) despite larger than expected falls in German Industrial Production and Eurozone Sentix Investor Confidence data in May. Against the Japanese Yen, the Dollar plunged 0.94% to 108.40 (109.60) on a delayed reaction to broad-based Greenback selling that started this month. Sterling rebounded to 1.2725 from 1.2670 as the US Dollar extended losses. The USD/CNH pair (US Dollar against Offshore Chinese Yuan) slumped to 7.0570 from 7.0730 following Sunday’s release of a better than expected Chinese trade surplus to USD 62.9 billion. The surplus was a result of a fall in exports and imports in Dollar terms, not an improvement in economic activity.
Wall Street stocks lifted. The DOW finished at 27,545 (27,095) while the S&P 500 added 1.25% to close at 3,228 (3,190). US bond yields eased. The key 10-year US treasury rate finished at 0.88% (0.90%). The US 2-year note yield was higher at 0.23% from 0.21% yesterday.

Germany - Industrial Production Chart - FXFactory - 09 June 2020
Germany – Industrial Production Chart – FXFactory – 09 June 2020

Japan’s Final Q1 GDP slipped to -0.6% missing forecasts at -0.5%. Japan’s Economic Watchers Sentiment improved to 15.5 from 7.9, beating expectations at 12.6. Germany’s May Factory Orders slumped to -17.9% against the previous month’s upwardly revised -8.9% (-9.2%), missing forecasts at -16.0%. The Eurozone Sentix Investor Confidence Index dropped to -24.8 against forecasts of -22.0.
Canada’s Housing Starts rose to 193,000 units, beating expectations of 160,000.

On the Lookout: Today’s economic and events calendar are light as markets prepare for the US Federal Reserve’s two-day meeting which kicks off today. After Friday’s surprisingly good US Jobs report, and rise in US bond yields, policymakers will have to take these into consideration in any decision and the signals they will send to the markets. The appetite for risk has grown increasing bloated and officials are increasing aware of this.
Today’s data begins with New Zealand’s ANZ Business Confidence Index followed by Australia’s NAB Business Confidence Index and ANZ Job Ads for May. The UK’s BRC Retail Sales starts off Euro area data. Switzerland reports its Unemployment rate followed by Germany’s Trade Balance, Eurozone Final Employment Change and Revised Q1 GDP. The US reports on its JOLTS Job Advertisements, NFIB Small Business Index, and Final Wholesale Sales Inventories.

Trading Perspective: The latest Commitment of Traders/CFTC report (week ended 2 June) saw speculators continue to sell US Dollars across the board, either extending short bets or trimming long bets against various currencies. According to Saxo Bank, who thankfully take pains to get the data and provide a short report/commentary, there was “continuous Dollar selling which was moderate but broad-based.” Total net short USD bets increased by 9% to total USD 6.9 billion, a 5-week high. This was mainly due to rising Euro long bets and short covering in the Kiwi and Canadian Loonie. The Dollar has slipped further in the past week which suggests that short USD market positioning will consolidate from here on in.

Germany - Industrial Production Chart - FXFactory - 09 June 2020
Germany – Industrial Production Chart – FXFactory – 09 June 2020

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