Tuesday, July 9, 2024

"Quiet Summer Tuesday with Powell's Testimony and a Deluge of US Supply on Tap"

From Marc to Market:

Overview: In the absence of fresh developments, the dollar is consolidating in narrow ranges today against the G10 currencies and enjoys as slight upward bias against most emerging market currencies but for a few currencies from the Asia Pacific region. With practically an empty US data calendar, Fed Chair Powell's testimony with be the highlight, and a soft headline CPI on Thursday anticipated. The US two-year premium over Germany has fallen from around 190 bp at the start of last week to 170 bp today, the narrowest in more than three months. This has coincided with the euro advancing every session last week, before slipping slightly yesterday. The greenback continues to hover around JPY161.

Asia Pacific equities rallied but for Hong Kong, led by 1% gains by Japan and China. Europe's Stoxx 600 is slightly lower and is threatening to extend its slump for the third consecutive session and eight of the past 11 sessions. US index futures are trading with a firmer bias after the S&P 500 and NASDAQ set new record highs yesterday. Asia Pacific bond yields slipped earlier today, but European benchmark 10-year yields are 2-4 bp higher. The 10-year US Treasury yield is little changed at 4.28%. The US Treasury is selling nearly $175 bln in securities today (42-day cash management bill, 52-week bills, and three-year notes). Gold gave back its pre-weekend gains yesterday, perhaps weighed down by news that the PBOC did not add to its holdings for a second consecutive month in June, but support near $2350 remained intact. It is trading with a firmer bias today. After reversing lower before the weekend after reaching almost $83.60, September WTI fell nearly 1% yesterday and is off about 0.7% today to slip below $81. Initial support is seen around $80....