Dollar on Back Foot Ahead of Powell

Federal Reserve Building in DC

  • The focus in the US session turns to Powell’s testimony before a Senate Committee
  • The UK employment data were in line with expectations
  • The New Zealand dollar is leading the charge today against the greenback
  • Oil prices dropped more than 4% yesterday and are struggling to stabilize today
  • Singapore trade data was weaker than expected in June; Argentina June CPI is expected to rise 3.6% m/m

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Drivers for the Week Ahead

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  • Many find the trajectory worrisome, but the multilateral system is holding under strain
  • Rather than the end of the world as we know it, investors should be prepared for another batch of strong US economic data this week
  • UK data are likely to be sufficiently strong to support the notion Carney and the MPC will deliver a rate hike next month
  • China provided fresh insight into its economy; three reports from Japan will interest investors
  • Within this recent EM bounce, Turkey stands out as an underperformer

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Trump Trips Sterling, but Greenback Enjoys Broad Gains

new nature

  • US President Trump was critical of UK Prime Minister’s approach to Brexit and threatens not to go forward with a bilateral deal.
  • China’s trade surplus swells as producers try to beat the imposition of tariffs
  • Global equities rally after US advance brought the S&P 500 near the 2800 cap in place since February’s swoon.
  • A light economic calendar in North America features Powell’s prepared remarks for next week’s testimony and money center bank earnings.

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Escalating Trade Tensions Set Tone for Capital Markets

  • The US specified $200 bln of Chinese goods that will be subject to another tariff for its retaliation against the first round of tariffs ($34 bln of goods) for intellectual property rights violations.
  • Stocks and commodities mostly move lower, while the dollar and bonds move higher.
  • The Bank of Canada is widely expected to hike rates today.
  • Malaysia’s new central banker left rates steady as most expected.
  • The S&P 500 is poised to gap lower after gapping higher both Monday and Tuesday

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Drivers for the Week Ahead

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  • Trade tensions simmer, while NATO provides the next forum to air tensions between the US and Europe
  • US reports CPI, which is creeping closer to 3%
  • The UK’s Brexit strategy turns and leads to David Davis (and team) resigning.  Next battle:  Parliament
  • The Bank of Canada is likely to hike rates on July 11

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Dollar Soft as Global Markets Stabilize

new sky

  • The global capital markets are trying to stabilize
  • The Riksbank was more hawkish than the market expected
  • The RBA left rates on hold as widely expected and emphasized the uncertain outlook.
  • The US reports factory goods orders and finalizes the durable goods order report
  • Trade issues are very much in the forefront of investors’ attention
  • Korea June CPI rose 1.5% y/y; Turkey June CPI rose 15.39% y/y; Chile reports June trade

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Drivers for the Week Ahead

Blog icons-DRIVERS

  • US President Trump is intent on disrupting the post-WWII arrangement that prioritized and ideological conflict over economic rivalries
  • The week is bookended by tariffs
  • The flash PMI report for Europe steals the thunder of the final report
  • Investor attention will increasingly turn to the earnings season
  • The US employment report is probably still the single most important data release of the month

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