After surviving scandal after scandal, UK's PM Johnson finally called it quits today and that helped to rally the GBP as investors greeted the news with "don't let the door hit you on the way out".

The strongest to the weakest at the end of day

The GBP was the 2nd strongest of the day with the AUD the strongest, and the NZD coming in 3rd on risk-on flows. Expectations that China would allow local governments to sell $220 billion worth of bonds in the 2nd half of the year in order to accelerate infrastructure funding, helped the AUD and NZD earlier. Later risk-on sentiment on the back of higher European and US stocks gave those currencies additional upside momentum.

Meanwhile investors exited the safety of the CHF and JPY, with the EUR also moving lower on concerns about growth continuing to weigh on that currency.

The USD was tilted to the downside but also marginally higher vs the EUR, JPY and CHF. The USD fell the most vs the AUD (down -0.96%). Technically, the pair was bouncing off some pretty decent support against the 50% of the pairs trading range since the March 2020 low at 0.67638. The low price reached earlier this week was a few pips below that level at 0.67608. Technically, the AUDUSD pair moved above it's 100 hour MA at 0.6820, but remains below its 200 hour MA at 0.68547. In the new trading day it will take a move above that MA level (and stay above) to give the buyers added confidence to the upside.

Feds Bullard and Waller both talked today and both signaled their views that the Fed 'has a good shot at a soft landing. Both advocate continued fed tightening, but rather than stagflation, the better bet is that growth will slow to trend and inflation will come under control rapidly. Bullard advocates that the markets are mistaking slowing growth to a recession, although the Atlanta Fed is still looking at -1.9% for 2nd quarter growth (so there technically would be 2 quarters of negative growth). It all semantics, I guess (or beauty is in the eyes of the beholder).

Tomorrow the markets will be focused on the US jobs report which is expected to show moderating jobs growth (260K vs 390K last month and lower than the 3 month average of 408K), but a steady employment rate near lows (3.6% estimate, unchanged from 3.6% last month). The average hourly earnings are expected to rise 0.3% M/M, matching the May rate, while YoY, the gain is expected to moderate to +5% from 5.2% in May. That may be key for the positive or negative reaction by the markets.

Looking at other markets going into the 5 PM close:

  • Spot gold is trading up $1.23 or 0.07% at $1740.05
  • Spot silver is up $0.02 or 0.12% at $19.22
  • WTI crude oil rallied strongly with an intraday high at $104.48 and an low at $96.57, but backed off after a larger than expected build of inventories. The price is trading at $102.07 up $3.54 on the day
  • Bitcoin stayed above $20000 and rallied to a high of $21847.25 helped by rising stocks and risk-on sentiment.

In the US debt market:

  • 2 year yield 3.024% up about 1.8 basis points on the day
  • 10 year 3.002%, up from 2.934% at the end of day yesterday
  • 30 year 3.19%, up from 3.122% at the end of day yesterday