- Fed's Bostic: Beyond July we will adapt to the data as warranted
- Fed's George Fed Pres. George: Speed at which interest rates should rise an open question
- Bank of Englands Bailey: We should not pre-commit on what we will do
- UK's conservative 1922 chair: Nominations replace Johnson will open & close tomorrow
- Fed's Bullard in interview with AP: Supports a 75 basis point hike at the July meeting
- NY Fed: 1 year inflation expectation rises to 6.8% vs 6.6% last month.
- US employment trends for June rises to 119.38 from 118.88 last month
- US treasury auctions off at $43 billion of 3 year notes at 3.093%
Markets:
- Gold down $11 to $1731
- US 10-year yields down 11 bps to 2.99%
- WTI crude oil down $1.06 to $103.73
- S&P 500 down 1.2%
- Nasdaq down 2.3%
- USD leads, AUD lags
The headlines weren't what moved the market in North American trade, it was what happened earlier and on the weekend. I wrote about the five worries that were weighing on the market:
- China covid return
- European natural gas cutoff
- Emerging market turmoil
- Bank liquidity problems in China
- USD replacing JPY as the safe haven of choice
I would add that few want to wade into risk trades ahead of Wednesday's CPI report.
The euro took a leg lower late in the day, hitting a fresh 20-year low at 1.0035. With Nord Stream closed until July 22, it will be tough to find a bid.
The political uncertainty in the UK isn't helping but power prices are the main concern there as well along with the probability of a continent-wide recession if Russia puts on the gas squeeze. Cable fell to 1.1890 and closed near the lows of the day.
The Australian dollar reflected the ongoing concern about China re-entering lockdowns. AUD/USD finally took out the 0.6760 zone of support and continued to as low as 0.6715. Talk of China stimulus is no longer doing the trick as industrial metals slide and worries about Aussie housing intensify.
In contrast, USD/CAD was unable to break to new highs. Oil fell $3 early but recouped most of the decline later and natural gas prices rose more than 7%. From a peak of 1.3051 the paid fell to 1.2976 before a late climb to 1.3000 as stocks stumbled to the finish line.
USD/JPY continues to be the main event and some buying started when Kuroda stuck to the dovish script in early-Asia comments. The new high of 137.75 dates back to 1998 and is the culmination (so far) of a 2200 pip move since March. The pair had been consolidating for three weeks as yields looked to be peaking but that paradigm was shattered despite yields falling today.
