Morning Commentary: Markets on Hold for Now

Foreign Exchange - Morning Commentary

Markets on Hold for Now

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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
As we arrive this morning, most major assets classes remain range bound as investors and traders look for near term direction ahead of the key G20 meeting in Japan this weekend. While equity markets have had a great run in June and remain cautiously optimistic that President Trump and President Xi from China will jump start the stalled trade talks, U.S. and G7 interest rates continue to indicate an ongoing concern about a global slowdown and a U.S. slowdown (see below) as interest rates consolidate near recent lows.
With regards to the U.S. dollar (DXY), the DXY index has temporarily stabilized after falling sharply after last week’s FOMC meeting and another sharp leg down in U.S. interest rates across the yield curve. While many key major currencies have continued to trade over the same turf over the past few days, commodity-linked and emerging market currencies have remained better bid.
Market participants should be prepared for a continued barrage of tweets from President Trump on a wide range of topics as he and the White House continue to address what they see as unfair trade imbalances. Market participants should continue to expect the White House putting forth the “America First” agenda this weekend and well after the G20 meeting which will continue to keep all of us who watch markets on our toes.
  • EZ Consumer Confidence for the month of June fell sharply and well below expectations at 109.6 from 111.8 in May. This was the lowest level of confidence since 2016. The euro weakened initially but got a small boost from higher-than-expected German CPI data. The euro traded in a narrow range and is currently sitting in the middle of that range.
  • The U.S. economy grew at a very healthy 3.1% in Q1 which was revised slightly lower from the original release. Q4 GDP remained at 3.1%, but many economists are forecasting sub-two percent growth in Q2. Personal Consumption data within the report was weaker than forecast at 0.9% against expectations of a gain of 1.3%. The net result after the release of this report is that U.S. interest rates are fractionally lower on the session and U.S. equities are opening mixed.
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