Risk trades were decidedly lower in the NY session and this helped the buck extend gains. Equities lost about -0.4% in broad terms as the S&P test of 950 was promptly rejected. Oil prices bucked the trend and headed nearly 2% higher to well above $71/bbl. The weekly inventory report showed a sharp -4.4 million barrel draw in crude stockpiles while implied demand continued to creep higher. That said, we think the move in the commodity north of $70 is a tad overdone to say the least. US Treasuries caught some nice price action today as well. The 10-year note auction was healthy on the demand front with a 2.62 bid/cover and foreigners taking 34% of the offering to boot. This threw some cold water on the notion that demand for US paper was waning after Russia announced that they would be divesting away from some of their US Treasury holdings. The good news for the dollar is that the US now holds a near 30 basis point advantage over the EUR 10-year yield and this should prove a boon to capital flows into the United States.
The US dollar's rally was across the board. EUR/USD sank a sharp -120 pips towards the 1.3980/90 zone. We would expect some decent resistance into 1.40, with potential to 1.4040 if above there. Below 1.3910 could be a problem for the pair. Cable slipped a more modest -60 pips in the session towards the 1.6350/60 area. Ostensibly, better than expected overnight data in the UK kept the declines to a limit here. The yen crosses were mixed with EUR/JPY decidedly lower and sinking -80 pips to 137.40/50 while USD/JPY was 25 points higher to 98.20/30 as the buck's strength outpaced the ''carry'' selling. The commodity currencies failed to extend higher despite the upmove in oil and this suggests the rally in crude is quite doubtful indeed. USD/CAD rose 100 pips to 1.1090/95 while AUD/USD shed about -80 points towards the 0.8030/35 area.
Upcoming Economic Data Releases (Asia Session) prior expected
- 6/10 22:30 NZ Performance of Manufacturing Index
- 6/10 23:01 UK NIESR GDP Estimate MAY -1.50% - -
- 6/10 23:50 JN Gross Domestic Product (QoQ) 1Q F -4.00% -4.00%
- 6/11 1:00 AU Consumer Inflation Expectation JUN 2.30% - -
- 6/11 1:30 AU Employment Change MAY 27.3K -30.0K
- 6/11 1:30 AU Unemployment Rate MAY 5.40% 5.70%
- 6/11 CH Fixed Assets Inv Urban YTD YoY MAY 30.50% 31.00%
- 6/11 CH Trade Balance (USD) MAY $13.14B $14.90B
- 6/11 CH Exports YoY% MAY -22.60% -23.00%
- 6/11 CH Imports YoY% MAY -23.00% -22.00%
