Tomorrow is massive so today should be quiet
Tomorrow is a very risky day with a European Central Bank meeting, the testimony of Former FBI Director Comey and, of course, the general election here in the UK. With a day like that tomorrow, the broad consensus is that very little will happen today; indeed the first two of these risk events are already in a purdah period with the silence on the election news beginning when polls open tomorrow morning at 7am.
China buying may have little impact on the USD
Overnight markets have focused on reports that China is willing to become more invested in the US economy than ever before by increasing its holding of US Treasury debt. We ascribe little weight to the reports and the correlation between the two assets are rather poor so we think that any increased Chinese buying would have little effect on the USD as a whole.
Can Trump trade wriggle out of pressure?
Indeed, USD is currently at its lowest level since October with the Japanese yen strengthening on risk aversion. We see little reason why that will change today although a Comey testimony that veers away from detail, so as to not endanger the separate investigation by former FBI Chief Robert Mueller may give the greenback a slight increase once that event risk is out of the way. Rumours that the Trump camp may want to have a vote on healthcare in July and something on taxes in September may be able to calm disquiet over the policy agenda further.
There is, however, no way that markets are going to express that viewpoint before Comey takes the stand tomorrow nor before the ECB press conference is out of the way too.
The Day Ahead
The data calendar today is unlikely to offer much in the way of volatility either with UK house prices and Italian retail sales the only real announcements of note before tomorrow.