From Marc Chandler at Bannockburn Global Forex:
The lack of progress in re-opening the Strait of Hormuz has not prevented oil prices from stabilizing or risk-appetites improving today. Equities and bonds are trading with a firmer bias. The Trump-Xi meeting tomorrow is key talking point today. Ahead of it, the PBOC set the dollar’s reference rate at a new three-year low. US Treasury Secretary Bessent was in Tokyo earlier this week and today, Japan reported a record current account surplus, flattered by its largest trade surplus in five years. The dollar, which is firmer against most G10 currencies, is hovering near JPY158, where the BOJ is thought to have intervened a week ago.
Although economic theory puts emphasis on interest rate differentials, we find that the dollar is frequently sensitive to the direction of US interest rates. And the market is continuing to move against a Fed cut this year. The futures market appears to be discounting about a 35% chance of a hike this year. It was still pricing in a chance of a cut at the end of last month. In addition, the momentum indicators continue to favor an upside break for the greenback out of the recent consolidation....
....MUCH MORE
