Markets are mixed ahead of Q2 earnings season
The Q2 earnings season kicks off this week -- JPMorgan, Goldman Sachs, Citibank and BOA will be reporting results. Treasury yields are lower and the dollar is slightly higher. Despite Asian and European equities moving higher, US equities opened lower. Traders await Fed Chair Powell’s semi-annual testimony for Congress on Wednesday and US inflation data released this week. Investors remain concerned with the timing of the Fed’s tapering of asset purchases and the recent spread of the Delta variant.
Economic data and events:
Tuesday: CPI (June), Small Business Optimism Index (June)
Wednesday Federal Reserve Beige Book, Fed Chai Powell testifies, PPI (June), Bank of Canada meets, Reserve Bank of New Zealand meets
July 12, 2021
EUR/USD 1.1865 GBP/USD 1.3873 USD/CAD 1.2494 AUD/USD 0.7474 USD/JPY 110.3700 USD/CNH 6.4804 USD/ILS 3.2807 USD/MXN 19.9144 USD/CHF 0.9151 USD/INR 74.5788 USD/BRL 5.2477 USD/SGD 1.3519 USD/DKK 6.2699 USD/SEK 8.5892 USD/NOK 8.6977
The dollar is broadly higher as a safe-haven refuge on renewed concerns with Covid-19 variants, uncertain corporate earnings and Powell’s testimony to Congress. According to the Commodity Futures Trading Commission (CFTC), large currency speculators reduced USD short positions to the lowest level in over a year amid increased possibility of Fed tapering and rate hikes sooner than previously expected.GBP
The pound is lower amid broad strength in the USD. Traders are concerned over PM Boris Johnson’s plans to remove most of the remaining pandemic restrictions on July 19, despite the recent surge in cases. The good news – in the UK, more than 87% of adults have been given at least one dose of a vaccine and 66% have been given two.EUR
The euro is lower by 0.2% over the weekend, but well above last week’s low at $1.1785. Markets reacted to comments by ECB President Lagarde that she was ready to change forward guidance at her next meeting on July 22 amid rising inflation concerns. German bund yields fell to -0.30, its lowest level since April.CAD
The Canadian dollar is lower due to broad US dollar strength and lower commodity prices – oil lower by nearly 1%. The Bank of Canada meets on Wednesday, and traders are expecting the BOC to signal its intentions are removing its ultra-loose monetary policy.ASIA/PACIFIC
The Reserve Bank of New Zealand has an interest rate policy meeting on Thursday. Traders expect the RBNZ to provide insight into its preparation to remove emergency monetary policy.
Last week, the People’s Bank of China surprised markets by lowering the banking system’s Reserve Requirement Ratio (RRR). It will effectively put $154 billion worth of liquidity into the economy, but traders are concerned that the move signals a potential recession. Also, it shows an increasingly wide divergence in policies with the US.
For more analysis on FX markets or information regarding SVB's FX services:
See all of SVB's latest FX information and commentary at www.svb.com/trends-insights/foreign-exchange-advisory
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