- Forex today was traded in a risk-off environment where both the US Dollar and yields sunk and gold surged.
- U.S. stocks were under pressure on softer U.S. data and a mixed bunch of earnings.
There were a number of geopolitical tensions rearing their ugly head again from across the globe including Brexit, and trade wars in the main.
U.S. data releases, which were broadly in line with market expectations, evoked little reaction. However, US housing data came in on the softer side of market in June with housing starts falling 0.9% m/m (mkt: -0.7%, last: -0.4%) and building permits down 6.1% m/m (mkt: +0.1%, last: +0.7%). Meanwhile, the Federal Reserve's Beige Book stated that the economic activity continued to expand at a modest pace overall from mid-May through early July, with little change from the prior reporting period.
In European trade, the focus was on the final June reading on the euro Consumer Price Index(CPI) and UK CPI inflation. Euro area headline CPI was revised 0.1%pt higher to 1.3% y/y while Core Inflation was unchanged from its earlier print of 1.1% y/y, well below the ECB’s target rate of 2%.
"The ECB still has some work to do on getting inflation up. The data follows comments by ECB’s Coeure that the Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards the target in a sustained manner," analysts at ANZ Bank explained.
As for the UK's, this was in line with market expectations and stable in June at 2.0% y/y and core inflation ticked up 0.1%pt from May to 1.8%. "While data suggest the BoE is under no immediate pressure, a softening in producer input price inflation from 1.4% y/y in May to -0.3% in June suggests risks to pipeline goods inflation are skewed to the downside," the analysts at ANZ Bank noted.
As for Brexit and trade wars, the House of Lords moved to pass an amendment preventing the PM from ‘proroguing’ or suspending a sitting session of Parliament in the case of a no-deal Brexit which supported the upside in sterling. Meanwhile, Trump was saying that they had a long way to go with China on trade and said that they could impose tariffs on another $325 billion worth of Chinese imports if they wanted to. "China is supposed to be buying U.S. Farm products, we’ll see if they do," Trump said, which weighed on risk appetite and U.S. stocks, sending gold higher within its northerly trajectory that had kicked off in European trade, ending the New York session 1.2% higher.
- DXY was -0.2% on the day.
- GBP/USD briefly traded below 1.24 the figure to score the lowest level since 2017 at 1.2382. Cable then rebounded to 1.2450 on the Brexit headlines.
- EUR/USD climbed from 1.1200 to 1.1233.
- USD/JPY dropped from 108.20 to hold at 108 the figure.
- AUD/USD rallied from 0.6996 to 0.7025.
- NZD/USD outperformed, rising from 0.6700 to 0.6747 – a three-month high.
Key notes from Wall Street:
Key events ahead:
"In Australia, we have the key June employment report which is expected to rise 9k and see the unemployment rate hold at 5.2%. Westpac is forecasting a 10k increase in employment but expects the unemployment rate to decline to 5.1% due to a pull-back in the participation rate. Q2 NAB business survey will provide further detail on the monthly read – conditions (+2) and confidence (+3) both below average in June," analysts at Westpac explained.
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