It was a pretty uneventful day in terms of economic releases, but other market happenings didn’t disappoint as these pushed U.S. bond yields and the dollar higher.
On the flip side, a bit of risk aversion and Trump’s spat with China continued to drag the Aussie and its buddy the Kiwi lower.
- U.S. existing home sales down from 5.41M to 5.38M vs. 5.46M forecast
- Canadian wholesale sales recovered by 1.2% from earlier 0.1% dip
- BOE MPC member Broadbent: Ready to cut if inflation falls after QE reversal
- Australia’s CB leading index up by another 0.1%
Cautious remarks from BOE’s Broadbent
BOE Deputy Governor Ben Broadbent delivered a speech on the history and future of quantitative easing at the Society of Professional Economists in London. Before y’all doze off, here’s a quick rundown of some points he made that might be relevant to potential policy changes.
Note that the BOE is scheduled to have another monetary policy meeting next week, so market watchers are keeping their eyes and ears peeled for any hints of tightening.
Broadbent’s views were of more longer-term nature, though, as he spoke about what might happen once the central bank starts reversing its quantitative easing program. He cited that they would follow the basic framework they laid out in their November 2015 Inflation Report “only once the official Bank Rate had risen in some way.”
Broadbent also explained their decision to add that bit on “Decisions on Bank Rate will take into account any impact of changes in the stock of purchased assets on overall monetary conditions, in order to achieve the inflation target.” in their earlier statement. He clarified that, in case inflation weakens then, their first response would likely be to cut rates instead of resuming QE.
Trump hinted at U.S. GDP read
Did he or did he not leak the advance Q2 GDP reading? An article on FOX Business is reporting that the figure might clock in a 4.8% expansion, according to an associate in the White House.
Keep in mind that analysts are expecting to see a 4.2% growth figure, more than twice as much as the earlier 2.0% GDP reading. If so, the Trump administration could give itself a pat on the back and a whole lot of congratulatory tweets to themselves, citing fiscal reform as the main reason for the strong rebound.
U.S. bond yields closed in the green, likely buoyed by stronger tightening prospects:
- 2-year yield up 3.6 basis points to 2.6308%
- 5-year yield up 5.8 basis points to 2.8228%
- 10-year yield up 6.7 basis points to 2.9597%
- 30-year yield up 7.2 basis points to 3.0974%
Stock indices, however, were mixed while commodities continued to take hits.
- Dow 30 index is down to 25,044.29 (-0.06%)
- Nasdaq is up to 7,841.87 (+0.28%)
- S&P 500 index is up to 2,806.98 (+0.18%)
- Gold retreated to $1,224.50 per troy ounce (-0.61%)
- WTI crude oil fell to $67.81 per barrel (-0.68%)
Major Market Mover(s):
AUD & NZD
The Aussie was unable to get back on its feet from the earlier slide, and was joined by the Kiwi at the losers’ bench by the end of the session.
AUD/USD fell from .7408 to a low of .7371, NZD/USD sold off from .6810 to .6783, AUD/JPY is down from 82.31 to 82.04, NZD/JPY fell to 75.43, EUR/NZD is up to 1.7238, and GBP/AUD popped up to 1.7758.
USD & JPY
The Greenback got a strong boost from higher yields, possibly lifted by upbeat GDP expectations, while the yen was able to snag risk-off flows.
USD/JPY climbed from 111.10 to a high of 111.55 then retreated to 111.32, USD/CHF is up to a high of .9943, EUR/USD tumbled from 1.1718 to a low of 1.1683, and GBP/USD fell to the 1.3100 levels.
EUR/JPY is down to 130.05, GBP/JPY dropped to 145.68, CAD/JPY fell from 84.65 to 84.40, and CHF/JPY slipped to 112.01.
Watch Out For:
- 12:30 am GMT: Japanese flash manufacturing PMI (rise from 53.0 to 53.2 expected)
- 5:00 am GMT: BOJ core CPI y/y (increase from 0.5% to 0.6% expected)