Forex news for New York trade on May 26, 2021:
- Fed's Quarles: Still significantly short of measures for "substantial further progress"
- Fed's Quarles: Will be important to have taper discussions at 'upcoming meetings'
- U.S. Treasury auctioned off $61 billion of 10 year notes at a high yield of 0.788%
- US weekly EIA oil inventories -1662K vs -1000K expected
- China to limit some corn imports and cancel some US shipments on domestic blending issues
Markets:
- Gold down $4 to $1894
- US 10-year yields up 2 bps to 1.58%
- WTI crude oil up 15-cents to $65.94
- S&P 500 up 8 points to 4195
- Russell 2000 up 2%
- NZD leads, CAD lags
It was a slow news day and not much was happening in stocks or fixed income but the FX market was lively. The main characteristic was a persistent bid in the US dollar. We highlighted the possibility of month-end flows into the dollar and that was the likely catalyst with firms hurrying orders ahead of the US long weekend. The bid was especially strong into the London fix and then again as London went home.
I expected some of that to unwind when London went home but that wasn't the case at all as the dollar held the bid.
With the dollar so strong, commodities came under some modest pressure. The main move was in gold. It earlier hit $1900 in the 10th day of gains but gave it all back and more late in the day to break the streak.
The Canadian dollar was particularly soft even as oil prices held steady. Again, that could be a sign of position squaring or rebalancing. USD/CAD rose to 1.2121.
The kiwi tried to hold above 0.7300 on the back of the RBNZ shift on the pace of rate hikes but it couldn't withstand the dollar bid and will finish just below at 0.7290.
