FX Trader, Loonieviews.net
USD dollar bears are raising a fuss and a holler. They’ve been short all summer just trying to earn a dollar (apologies to Eddie Cochran). Then, yesterday, Bank of England Governor Mark Carney and Fed Chairman Jerome Powell proved their efforts were in vain.
The broad US dollar rally triggered by dovish comments from Carney and exacerbated by Powell’s rosy, rate raising outlook, continued until just after the New York open. Apparently, EURUSD traders decided that the 1.2% drop in the single currency from yesterday morning was enough. They may have been encouraged by the 12.3% drop in US housing starts in June and a 2.2% fall in building permits. In addition, European Central Bank governing council member Francois Villeroy repeating his comment from last week, that the earliest ECB rate hike would be in the summer of 2019, underpinned the single currency. However, as rallies go, it was pathetic. EURUSD rose from 1.1602 to 1.1638. For today, a break above minor resistance at 1.1665 would extend gains to 1.1690.
Sterling can’t catch a break. A dovish Carney does his best to derail sentiment for a UK rate hike on August 2. This morning’s string of soft UK economic reports which included a weaker than expected June CPI report (Actual 2.4% vs forecast 2.6%) coupled with rising fears of a no-deal Brexit led to GBPUSD probing support in the 1.3010 area. Prime Minister Theresa May’s tenuous tenure and the risk of UK elections has fueled the downside and until it is resolved with limit gains. Boris Johnston’s speech could cause fireworks. Some believe it could be his opening gambit for a leadership bid.
Fed Chair Powell’s has started his second day of testimony. Analysts expect a repeat of yesterday’s optimistic economic outlook.
Wall Street opened flat. Traders have tempered their enthusiasm for strong corporate earnings because of the plunge in oil prices. WTI oil prices are hovering around the recent low of $67.05. Traders expect today’s Energy Information Administration (EIA) crude stocks change report to echo yesterday’s increase in weekly crude oil stocks, reported by American Petroleum Institute.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
