- FX volatility distorted by month and quarter end flows
- Spanish inflation data suggests ECB has a problem
- US dollar opens with gains across the board-CHF flat
USDCAD Snapshot open 1.2885-89, overnight range 1.2860-1.2889 close 1.2877, WTI oil $112.06, Gold $1814.86
The Canadian dollar is heading into month-end with a bit of a swagger. Yesterday and today, it has opened the New York trading session as the best performing currency, compared to the G-10 majors.
The end of June means increased portfolio rebalancing flows as it is a month, quarter, and half-year end. The FX flows are expected to be chunky. That’s because the S&P 500 index lost over 7.5%
in June which forces portfolio managers to buy US dollars to maintain their benchmarks. Not all of them wait until the last day, which is part of the reason why the US dollar has climbed this week.
Risk sentiment took a turn for the worse yesterday when the US Consumer Sentiment dropped to its lowest level since February 2021. The Conference Board reported the “Consumer Confidence Index® decreased in June falling 4.5 points to 98.7 from 103.2 in May.
The number that spooked equity traders was the Expectations Index. It measures consumers’ short-term outlook for income, business, and labor market conditions.
It was the worst result since 2013, falling to 66.4 from 73.7.Wall Street stocks went into freefall.
The S&P 500 closed with a 2.01% loss while the NASDAQ gave up 2.98%. The trend continued in Asia with Chinese mainland stock indexes leading the way. European bourses are struggling as well. Germany’s Dax index is down 1.83% while the French CAC index has lost 1.16%.
S&P 500 futures are clawing back overnight losses in early NYT trading and have turned positive ahead of the Wall Street open, partly because the US 10-year Treasury yield eased from its Asia peak.
EURUSD traded in a 1.0487-1.0521 range. Hotter than expected Spanish inflation data (10.0% y/y vs forecast 8.5%) supported prices initially, but those gains have faded in early NY trading.
GBPUSD is trading with a negative bias in a 1.2143-1.2211 band. The currency pair is suffering from elevated UK recession risks and renewed Brexit concerns.
USDJPY is at the top of its overnight 135.79-136.57 range due to broad US dollar demand and the firmer 10-year US Treasury yield, which climbed from 3.12% yesterday to 3.164% in NY today.
AUDUSD and NZDUSD are weighed down by ongoing month and quarter-end US dollar demand, with the downside exacerbated by softer commodity prices. Australia’s May Retail sales rose 0.9%, compared to the forecast for a 0.4% increase.
US Q1 Final GDP data is expected at 8.1%. Fed Chair Powell participates in an Economic Panel discussion at the ECB forum in Sintra, Portugal.
