The Greenback Steadies After Retreating On The Jobs Data

Overview: After falling to 1.55% after the US employment data, which, while mixing expectations, could hardly be considered weak, the US 10-year yield has come back firmer today (1.58%) This may be lending the greenback a better tone. Equity markets are quiet. Most markets in the Asia Pacific region edged higher. Australia, Taiwan, and Hong Kong were notable exceptions. Europe's Dow Jones Stoxx 600 made a marginal new record high but is consolidating before the US session. Futures on the major US indices are a little heavier. European bond yields are slightly higher. Most seem to expect the ECB to affirm its current pace of bond buying at this week's meeting. However, as we have noted, the euro, European interest rates, and the premia over German Bunds have risen since the ECB stepped up its purchases in mid-March. Doubts over the UK's ability to fully open on June 21 may be favoring some profit-taking on sterling, which is the weakest of the majors, off about 0.2%. Emerging market currencies are narrowly mixed. AMLO's party and alliance lost seats in the lower chamber as a result of yesterday's election, and the diluted mandate has seen the peso trade higher. It is competing with the Turkish lira for the best performing emerging market currency today. Firm US rates and dollar are dragging gold lower after the yellow metal rebounded from around $1856 to $1896 on the back of the drop in US rates following the jobs report. The near-term risk extends toward $1876. July WTI tested the $70 a barrel level and paused. Other industrial commodities are trading with a modest downside bias.

Asia Pacific

China reported a $45.5 bln trade surplus in May. It reflected somewhat slower export growth of 27.9% in dollar terms (32.3% in April, year-over-year), while imports rose 51.1% (43.1% in April). In addition, the rise in industrial metal prices bolstered imports. Consider that iron ore and concentrate imports rose by over 85% in the first five months of the year, while only about 6% in volume terms. Similarly, copper imports are up almost 54.5% in value and 6.4% in volume.

Chinese exports to the US were firm at 21% and 13% to the EU. Exports to India doubled year-over-year. There has also been a shift in China's export mix. Textile and fabric exports, which include PPE and the like, fell by over 40%. Meanwhile, exports of household appliances and lighting rose sharply. There were some distortions in the data the make future projections difficult. There were fewer working days in May, and Guangzhou ports were disrupted by contagion. Separately, China reported that May reserves rose by $23 bln to $3.22 trillion. It was the second monthly increase after declining in Q1 (as the dollar strengthened). Reserves have risen by about $5 bln net this year and are about $120 bln above last May's level.

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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