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Market Macro Wrap 23 Jun 17
The dollar has not gone far from where it started the week with the USD-index up 0.3% since Monday open. The strongest G10 currency is CHF up 0.25% versus USD and the weakest is AUD down 0.68% versus the USD. In the Equities space, Nikkei closed up 0.95% for the week above the 20,000 mark while the European equities fell slightly thanks to a weak performance on Friday. The S&P 500 and the US 10 year Treasuries were largely flat which once again showed a lack of direction in the markets. In the energy space, WTI has found some support at $42.00 after falling sharply in the early part of the week. Oil is now looking at having the worst H1 in over 20 years.
As for USD, there seems to be no clarity from either the Fed or the US data. The Trump administration has also lost all credibility and hence, the market wants to wait before loading dollar longs. There are a number of Fed speakers on Friday but we don't see any providing clear guidance than the one provided by other speakers so far. The US data remains the key driving force with some focus on US health and tax reform. We still see upside potential in USDJPY.
In terms of events, the RBNZ and the Norges Bank have both changed their stance slightly to the hawkish side which has resulted in NOK and NZD both outperforming other currencies. Elsewhere, CAD recovered from early week losses on strong retail sales, however, weaker than expected CPI has now underwhelmed CAD bulls and hence, we expect a sideways range.
EUR was directionless and there is no change expected given mixed PMI (flash) data; the Euro-area manufacturing PMI (flash) reported above-expected numbers while services PMI underwhelmed. In the UK, the Queen Speech went ahead as planned but failed to excite the market. The BoE chief economist Haldane overshadowed Queen’s speech by his surprisingly hawkish remarks undoing the work of BoE Governor Carney just the day before. In our view, we are still bearish GBP as the risk from an unstable UK Government still remains.