The Dollar Snaps Back


 The US dollar is enjoying broad, even if not large, gains today following yesterday's recovery from three-year lows against sterling and four-year lows against the Canadian dollar.  The greenback is firmer against all the major currencies.  The Australian and New Zealand dollars the weakest, even though Australia reported stronger than expected Q1 GDP and its stock market was among the strongest in the region with a 1% gain.  Emerging market currencies are also weaker.  Turkey's president, who has dismissed four central bank officials in the past two months, renewed his call for rate cuts and spurring a slide in the lira to new record lows.  The Israeli shekel is also heavy ahead of the deadline for the opposition to propose a new coalition.  The JP Morgan Emerging Markets Currency Index is lower for the second consecutive session.  It has not suffered back-to-back losses since May 11-12.  Asia Pacific equities were mixed, with China, Hong Kong, and India heavy. Philippine shares rallied more than 3% as social restrictions eased and foreign investment returned.   Europe's Dow Jones Stoxx 600 is firm but consolidating new yesterday's record high.  US futures are little changed.  The US 10-year yield is little changed after pulling back from near 1.64% yesterday.  It is holding above 1.60% but had closed below it in three of last week's five sessions.  European yields are a touch firmer today.  Gold is struggling to maintain the foothold above $1900, and oil prices are firm, with July WTI solidifying its hold on the $68-handle.  China's ability to stem the rise of industrial commodities is being tested.  Iron ore gained for the fourth consecutive session, and steel rebar has risen in three of the past four sessions.  Copper (JJC) is off for the second session, and lumber prices fell in the US yesterday for the sixth consecutive session.  The CRB Index is at its best level since 2015.  

Asia Pacific

Australia's economy expanded by 1.8% quarter-over-quarter in Q1 21, which was a little faster than expected, and Q4 20 GDP was revised to 3.2% from 3.1%.  Consumption and residential investment accounted for almost two-thirds of the growth. The relaxation of social restrictions spurred demand for services while the purchases of goods slipped.  Savings were tapped.   However, the second-most populous state (Victoria) has re-imposed and extended a lockdown that warns of slower growth in the current quarter.  In addition to household consumption, inventories were rebuilt (0.7 percentage-point contribution to GDP).  With inventory-sales ratios returning to pre-crisis levels, it is unlikely to be repeated.  

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Read more by Marc on his site Marc to Market.

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