- US July NAHB home builder sentiment 55 vs 65 expected
- Canadian June housing starts 273.8K vs 265.0K expected
Markets:
- Gold flat at $1706
- US 10-year yields up 4 bps to 2.97%
- WTI crude oil up $4.66 to $102.55
- S&P 500 down 32 points to 3830
- GBP leads, USD lags
Newsflow was light to start the week with the Fed in the blackout period but price action was brisk.
The mood early was upbeat with stock futures 30 points higher and the US dollar slumping. Sentiment continued to improve from there and the dollar continued to slide on follow through from Friday's trade and growing confidence that the Fed won't hike 100 bps.
But the dollar decline peaked at the London fix, suggesting a good portion of the move was flow driven. Cable rose to 120.33 at the fix then fell to 1.1955 at the close. That's still a 100 pip gain on the day but underscores the dollar's round trip.
The euro touched 1.02 and then gave back 60 pips.
USD/JPY was a quieter trade as it fell in Asia and then went sideways. Rising yields may have halted the decline as it chopped in the 138.00 to 138.40 range.
The Australian dollar ran to a five-day high in early US trade but peaked at 0.6850 and quickly reversed down to 0.6810. The loonie fared better with oil climbing $5 but it was a volatile trade as the pair fell 80 pips early only to get it all back.
So what was the catalyst for the turn? US home builder sentiment was far below expectations but that drew little initial reaction. It was a slow bleed in all risk trades so you have to chalk that up to a few factors:
- China worries (covid and lack of stimulus)
- Growing likelihood Russia will cut off Europe's gas
- Corporate earnings anxiety as Q2 reporting picks up
