market:
- WTI crude drops 22 cents to $69.29
- US 10-Year Yield Falls 6.4bps To 3.73%
- Gold climbs $6 to $1919
- Bitcoin rises 2.4% to $30,850
- S&P 500 down 0.8%
- USD leads, AUD lags
Demand for the US dollar has risen again despite falling US Treasury yields. Some of that could be a result of relative value, as Treasury yields have fallen significantly below U.S. Treasuries.
In any case, it was a typical risk-off day, except for the yen’s failure to sustain its bids. This is a red flag as there was some initial yen buying following the strong performance of the Japanese core CPI earlier. Some of that widened in the early US trade, with USD/JPY dropping to a trading low of 142.77 before a sharp turnaround, where it climbed 100 pips to a new nine-month high.
More broadly, the U.S. dollar’s strength peaked in the early days of North American trade, with the cable hitting 1.2688 amid a decline in commodity currencies and a massive sell-off in stocks. The move subsided from there as buyers dabbled in some stocks and oil prices rallied by more than $2. USD/CAD hit a 9-month low yesterday, but today it rose 80 pips before recovering about half of its movement.
AUD/USD struggled, but the damage came mainly early in the day, dropping to the bottom line. A week ago AUD/USD looked like it could break out of the topside, but the lack of meaningful fiscal stimulus from China quickly turned the tide and AUD/USD returned to the middle of the 4-month range. . Today was especially painful with a 75pips loss.
Remarkably, today is also the 7th anniversary of Brexit, and since then it has remained significantly down by around 20 digits against the dollar. Cable softened in Asia but then stalled.
Have a great weekend.
