Forex news for North American trade on June 11, 2020:
- US initial jobless claims 1542K vs 1550K estimate
- US May PPI +0.4% vs +0.1% m/m expected
- UK has abandoned its plan to introduce full border checks with the EU on January 1
- White House Hassett: July would be a good time for the next aid package
- California Covid 19 cases rise 2.3% vs. 7 day average of 2.1%
- CDC reports 20,486 new coronavirus cases
- US treasury auctions off $19 billion of 30 year bonds at high yield of 1.45%
- Treasury Secretary Mnuchin: Keeping close watch on China living up to trade deal
- White House Advisor Kudlow: Keeping interest rates at 0 for 2 years is good news
- Pres. Trump blames the Fed? At the least, he is mentioning them.
- Florida Covid 19 cases rise 2.5%
Markets:
- WTI crud down $3.43 to $36.17
- Gold down $10 to $1727
- US 10-year yields down 6 bps to 0.669%
- S&P 500 down 5.9% to 3002
- JPY leads, AUD lags
In hindsight all the signs were there. Risk trades outside of equities peeled back at the start of the week as the yen began to outperform and bonds fell back into their ranges. Equities were euphoric but it was dumb money chasing bankrupt companies. Others were expecting another jolt from the Fed.
The jolt from the Fed came but it wasn't enough to pull in fresh money and a trickle towards the exit turned into a flood. The problem for the bulls is that the Fed and government are now in a wait-and-see mode and that's not exactly a tailwind.
In terms of the virus, selling accelerated on the rising Florida headline and it's not an isolated case. Numbers are stubbornly high or rising in a number of states and climbing in many countries. It's not just cases either, hospitalizations are rising.
It was a very slow bleed for risk assets and equities were in charge but the story everywhere was the same. In FX, it meant a flight to the yen and dollar.
