US data beats expectations for a change – dollar strengthens

Quick Recap

We might have finally seen an indication that the US dollar bulls are genuinely not going to give up. Or to put it another way – the forces of Euro, Aussie and other bullishness are not yet strong enough to take these currencies higher.

Indeed the moves in the Aussie, which traded a full cent, and the Euro which traded through a 1.0889 – 1.1029 range highlight that perhaps this move is getting a little exhausted.

That is certainly likely if the US data starts to print on the stronger side of expectations. That’s inevitable because expectations cycle through an upgrade, downgrade, upgrade cycle as economists move forecasts and expectations as the data flow is received.

Separately Sterling went backwards last night after the CPI data showed no change in inflation last month. As I wrote at Busines Insider this morning that “reminded traders that the BoE has expressly said GBP strength is a threat to the inflation outlook. It also highlighted Andrew Haldane’s speech last week when he said that rates could go either way in the UK.” 

But that’s UK specific meaning EURGBP and GBPAUD trades might reward.

On stock markets the US went backwards, Europe (ex-UK) were higher and Shanghai made a remarkable recovery yesterday after hitting a low of 5,601 to close at 5,691. Remarkable.

On commodities gold is the most interesting as it is trying to break higher at $1,192 this morning.

On the day

Today sees the release of the RBA’s Financial Stability Review, which will attract more interest than normal given the RBA and APRA have been airing their concerns about the recent increases in investment lending. Elsewhere German IFO and US durable goods will be very important.

And here’s the overnight Scoreboard (8.30 am AEDT):

• Dow Jones down 0.58% to 18,011
• Nasdaq down 0.32% to 4,994
• S&P down 0.61% to 2,091
• London (FTSE 100) down 0.26% to 7,019
• Frankfurt (DAX) up 0.92% to 12,005
• Paris (CAC) up 0.67% to 5,088
• Tokyo (Nikkei) down 0.21% to 19,715
• Shanghai (Composite) Amazing (see below) up 0.11% to 3,691
• Hong Kong (Hang Seng) down 0.39% to 24,399
• ASX Futures (SPI June) down 6 to 5,971
• AUDUSD: 0.7877
• EURUSD: 1.0917
• USDJPY: 119.72
• GBPUSD: 1.4845
• USDCAD: 1.2500
• Crude: $47.38
• Gold: $1,192

CHART OF THE DAY:

Gold: It’s breaking higher – there could be $30 in this now both the trendline and my slow ma have broken. 

EURUSD: Yesterday I said Euro was “the canary in the US dollar coal mine. If the Euro can break up and through 1.1050 then 1.1250/60 becomes the target. I’m going to take 50% of long off the table as Euro approaches 1.1050.” That’s done.