Market Drivers June 15, 2018
Europe and Asia
EZ: CPI 1.9% vs 1.9%
North America
USD: Empire 8:30
USD: IP 9:15
USD: U of M 9:55
The dollar lost some luster in choppy Asian and European session trade today as short covering flows and market fears of fresh Trump tariffs against China unwound some of the massive gains from yesterday.
There was very little economic data on the calendar with only the perfunctory BOJ meeting in early Asia trade. BOJ reaffirmed its QE program but downgraded its assessment of inflation rate going forward. That produced a mild rally in USD/JPY which stalled ahead of the 111.00 figure but the pair quickly gave up the gains and traded back to 110.50 as markets awaited the scope of newly proposed tariffs. Reuters reported that the latest salvo from US President Donald Trump could affect as much as $100 Billion of Chinese goods which is sure to evoke a negative response from Chinese policymakers.
The political wrangling is clearly weighing on sentiment in capital markets with yields on benchmark US 10-year bonds drifting lower towards the 2.90% level. Despite the seemingly robust growth of the US economy, investors are clearly concerned that US policy will damage world trade and slow down growth sooner rather than later and this disconnect between the generally sanguine current situation and the negative future sentiment is keeping a cap on the dollar rally. For now, EUR/USD remains supported t 1500 and GBP/USD at 1.3200 as markets await the news on trade.
In North America today the calendar remains quiet with only 2nd tier data on the docket and U of M sentiment due at 1400 GMT. The US consumer appears to be in better shape as Q2 unfolds but much of the upside has already been priced in and the FX markets are unlikely to move much beyond the current levels until the political risk clears up.