It is a fairly quiet start to the week as traders look pensively at the impact of the moves in recent days. The dollar remains subdued as the bulls lick their wounds in the wake of Fed chair Powell’s dovish testimony. Markets continue to price for Fed rate cuts, but the question is now of how many. It is interesting to see that there is more of a consolidation that has developed in recent days on major markets such as EUR/USD and gold. However, with Treasury yields having picked up, the market seems to be leaning towards more positive risk appetite too. The relative outperformance of the Australian and New Zealand dollars seem to be a reflection of this. Similarly, the attitude is positive on Wall Street as markets push ever further into all-time highs. This is continuing to impact this morning. Today’s Chinese economic data has been encouraging risk too. Although China Q2 GDP fell to 6.2% as expected (+6.2% exp, down from +6.4% in Q1), the sector performance has been boosted in June. China Industrial Production for June jumped to 6.3% (+5.2% exp, +5.0% last) whilst China Retail Sales were strong at +9.8% (+8.3% exp, +8.6% last). This reflects the positive feedthrough of stimulus measures earlier in the year and that the government can still see the positive aspects of turning on the taps when needed. This is helping to feed into positive risk plays such as the Aussie and Kiwi this morning.
Wall Street closed again in all-time highs with the Dow +0.9% higher and the S&P 500 +0.5% at 3013. With US futures edging higher again today (currently around +0.1%) the move is helping Asian markets higher (Nikkei +0.2% and Shanghai Composite +0.1%). European markets are also edging higher with FTSE futures and DAX futures both around +0.1% higher. In forex, there is strong performance from AUD and NZD, with JPY being the underperformer. In commodities, the risk positive vibe is a minor drag on gold, whilst oil is also just edging marginally lower too.
The only data of any real significance on the economic calendar today is the US Empire State Manufacturing (New York Fed) at 1330BST which is expected to turn back positive in July to +0.5 (having dropped to -8.6 in June, which was the worst reading since October 2016).
It is also worth keeping an eye out for the comments of FOMC’s John Williams (who is a permanent voter on the committee and leans hawkish) who is speaking at 1350BST.