From Marc to Market:
Overview: The dollar is soaring today, and the euro is trading at new 22-year lows having traded below $1.03. Even a 50 bp hike by the Reserve Bank of Australia has failed to prevent a sharp drop in the Australian dollar. The session seemed to have begun off well enough. Japan, South Korean, Taiwan, Australian, and Indian shares advanced in the Asia Pacific region. Europe’s Stoxx 600 began off firmly, but quickly unwound yesterday’s 0.55% gain. US futures are 0.6-0.8% lower. The US 10-year yield is firm near 2.90%, while European benchmark yields are 2-7 bp lower, with the peripheral premiums edging higher. The Scandis and euro are off 1.25%-1.50%. The yen is the best performer, off around 0.1% against the greenback, followed by the Swiss franc’s 0.45% decline. Emerging market currencies are under pressure, with central Europe hit the hardest. The JP Morgan Emerging Market Currency Index is off about 1.5%, which, if sustained, would be the largest drop since early March.
Gold is soft but holding above $1800. August WTI is little changed around $108. US natgas has edged higher after falling almost 8% last week. Europe’s natgas is moving in the opposite direction. It is rising for the seventh consecutive session. Iron ore snapped a four-day spill to gain 2.8%, while September copper is off 2.65% after falling 3.75% last week, its fourth consecutive weekly drop....
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With the DXY now above 106 the moves almost feel unnatural. There is a lot of facile discussion of reasons for the action in the dollar but I'm not sure anyone knows what is going on or what it means.
