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Market Macro Wrap 14 July 2017
The week is marked by a return of the risk appetite and return of crude strength. In terms of the weekly standings, commodity currencies reign supreme with AUD, CAD and NOK top three. In the equities market, Nikkei 225 has closed +0.95% for the week and even though European equities are mixed today, we have seen decent gains since the start of the week except for FTSE; DAX +1.75%, CAC40 +1.53% and IBEX +1.62%. In the rates market, US and EU 10-year yields have now diverged thanks to the US CPI miss. In the energy space, WTI front month has gained nearly $2.5 to reach $46.42.
USD should now be sold and it is difficult to see a catalyst next week to revive USD upside. GBP has now become the top currency for the day and CPI next week should dictate Sterling direction from here.
EUR has not shown the same enthusiasm as the other European currencies and this is largely to do with the ECB rate decision next week where some dovish rhetoric could reiterate given US CPI miss.
The BoJ policy meeting is also due next week on the 19-20 July and we don’t see any change to policy rate or the 10-year JGB yield target. The annual pace of JGB purchases will also be kept unchanged (JPY 80 trillion) in the policy statement