Risk-on mood continues, equities higher, dollar lower
The risk-on mood in the markets continued overnight, despite Phase 4 stimulus talks in Congress at a stalemate and legal challenges against President Trump’s proposed tax cut on capital gains announced yesterday. Asian equity markets were mixed, but European markets were in the green and US equities are opening higher. The dollar index is lower, Scandinavian currencies (NOK and SEK) outperformed and the Brazilian real and New Zealand dollar underperformed. US CPI released this morning of 0.6% for July was double the expected 0.3%. Bond yields moved higher on the news. Oil is firm and gold rallied after dropping briefly below $1,900.
“Everyone thinks of changing the world, but no one thinks of changing himself.”
August 12, 2020
EUR/USD 1.1798 GBP/USD 1.3049 USD/CAD 1.3262 AUD/USD 0.7164 USD/JPY 106.7200 USD/CNH 6.9342 USD/ILS 3.4078 USD/MXN 22.3589 USD/CHF 0.9112 USD/INR 74.8288
The dollar index changed little overnight, but individual currencies performances against the dollar have changed. Gainers include NOK, SEK and CHF and losers BRL, JPY and NZD. Higher-than-expected CPI for July had little impact on markets this morning. US Treasuries were the exception, as 10YR yields reached 0.70%. Phase 4 stimulus talks at a stalemate in Congress, legal challenges to Trump’s proposed tax cut on capital gains, and Biden’s announcement of Kamala Harris as his running mate also had little impact on markets.GBP
The pound declined, then gained, after an after better-than-expected UK GDP data. Although Q2 GDP declined by its worst-ever 20.4% QoQ, more recent June GDP MoM reached 8.7%, better than the 8.0% expected. Also, GDP for May was revised higher, from 1.8% to 2.4%. The pound continues to trade over $1.30 for August, but only barely.EUR
The euro edged higher on a lack of market-moving events or data releases. Eurozone Industrial Production for June (MoM) of 9.1% was lower than expected and last month’s. Europe’s corporate bond spreads tightened to their narrowest since early March, and are near pre-virus levels.CAD
The Canadian dollar gained after earlier losses, as oil prices rose and risk-on trading continued. Canada reported strong housing starts yesterday, but large currency speculators remain net short CAD.ASIA/PACIFIC
The USD/CNY currency pair dropped slightly overnight. Traders await a slew of important China economic data for July tomorrow: New Home Sales, Industrial Production, Retail Sales and Property Investment figures.
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