Dollar's Mixed Session Inches Currency Closer to Bull Trend
The Dow Jones FXCM Dollar Index (ticker = USDollar) is inching into breakout territory. However, the push seems to be more an indirect response to more motivated counterparts than a motivated move from the greenback itself. Looking at the performance docket for the day, the currency's performance was mixed and tepid with an exception for the 'commodity bloc'. The dollar advanced 0.3 percent versus the Canadian currency, 0.6 percent against the Kiwi and soared 0.9 percent at the expense of the Aussie dollar. Given the split, this may be another early sign of destabilizing risk appetite trends. These pairings are more familiar carry trades. As it happens, the yen crosses have similarly come under uneven pressure and global equities were on the retreat for the session to tip the scales back towards breakdown risk.
History - and many false starts - tell us that it isn't good tradecraft to continuously position for the most dramatic scenarios. Yet, should risk deleveraging take, the cumulative impact on the market and trade opportunities will be substantial. The next steps to build momentum behind a flight vs fight response from the market ranks would be an S&P 500 slide below 1,865, a turn in implied volatility measures across multiple asset classes and an intensified bid for absolute safe havens (like the dollar and Treasuries). The quiet will eventually end - whether in an orderly or dramatic fashion. Even NY Fed President Dudley this past session noted concern over low volatility and surmised is may be a sign of complacency. On another central bank channel, the
British Pound Generates Limited Rate Speculation from Uptick in Inflation
When a piece of important event risk reinforces the market's expectations and traders are unable to capitalize, there is something amiss. That is the case with the
Japanese Yen: A QE Upgrade Requires a Collapse in the Crosses
Add AUDJPY and NZDJPY to the list of yen crosses that have taken out significant levels of support. You don't have to be a technical trader to appreciate the circumstances in the transition from the crosses incredible run from the third quarter of 2012, to months of consolidation, to these tentative slips. Without the belief of a prominent intervention hand to drive the yen lower (Yen pairings higher), the market is less confident in its bullish capabilities. While a carry trade appetite will return eventually, these pairs are currently expensive relative to their actual yield and the danger from any risk aversion moves is too obvious for traders not to take seriously.
Australian Dollar Breaks Lower as RBA's Debelle Warns of Outflows
The Australian dollar was the worst performing major this past session. So far this week, it is down between 0.6 (AUDNZD) and 1.6 percent (AUDJPY). A mild correction put the market on edge and made otherwise mundane updates more substantial market movers. The RBA minutes released Tuesday morning reiterated a moderate dovish but neutral stance - seeming more dovish given the circumstances. The same for RBA Dep Governor Debelle's suggestion that capital inflows would likely slow going forward. A bear trend requires something of more substance.
Expectations for an accommodative ECB move next month are reach near-certainty levels. And yet, the euro and market rates are slow to adjust. Rather than doubt, this reflects an uncertainty as to what specific combination of tools will be employed. Outright asset purchases, specific lending programs, sterilization adjustments and traditional rate cuts are all options. Some would have greater impact on the currency and others on the economy. Meanwhile, the 'risk' capital inflow into the Eurozone is coming under pressure as periphery bond yields rise.
Emerging Market Currencies, Capital Market Benchmarks Drop
Emerging Markets weren't able to escape the vacuum on risk trends this past session. The MSCI EM ETF dropped 0.8 percent on the day and all currencies - with the exception of the tepid 0.1 percent rise for the Russian Rubble - were in the red. Substantial declines for the Chilean Peso, South African Rand, Turkish Lira and Indian Rupiah reflects a broad mix more symbolic of 'risk off'.
Gold Activity Level Drops to Four-Month Low
No changes expected. It is likely that BOJ will defer further stimulus until after this meeting, particularly noting that the first quarter GDP came in stronger-than-expected following the sales tax hike.
Westpac Consumer Confidence Index (MAY)
The retail sentiment figure has declined from a
Westpac Consumer Confidence (MAY)
Skilled Vacancies (MoM) (APR)
Wage Cost Index (QoQ) (1Q)
Wage Cost Index (YoY) (1Q)
Credit Card Spending (MoM) (APR)
This concept measures the outstanding credit used by consumers to finance purchases of goods or services.
Credit Card Spending (YoY) (APR)
Supermarket Sales (YoY) (APR)
Money Supply M3 (YoY) (APR)
Measures the total amount of money in circulation in a country or group of countries.
Euro-Zone Current Account s.a. (euros) (MAR)
Euro-Zone Current Account n.s.a. (euros) (MAR)
Traders will look through the BoE minutes for information on housing, a recent area of interest for policymakers given the explosive rate of price gains in urban markets. BoE Governor
Retail Sales ex
Retail Sales ex
Retail Sales inc
Retail Sales inc
Euro-Zone Consumer Confidence (MAY A)
This concept tracks retail sentiment and is expected to report at the highest level in over 5 years. Unlikely to provide meaningful support for EUR.
DOE U.S. Crude Oil Inventories (
The central issue relating to US monetary policy is whether the Fed will continue "tapering" its asset purchases leading to the program ending later this year, and laying the foundation for interest rate hikes.
DOE U.S. Distillate Inventory (
DOE U.S. Gasoline Inventories (
Federal Open Market Committee Meeting Minutes
ANZ Job Advertisements (MoM) (APR)
Upcoming Events & Speeches
BoJ Gov Kuroda to Speak at Press Conference
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