Please note: Saxo's Morning Call is taking a summer break. We'll be back on July 30th.
The US dollar is down, EM and smaller G-10 currencies have rebounded and risk appetite is healthily ahead, despite the fact that Trump's tariffs on $34 billion worth of Chinese goods come into force today and China has announced additional retaliatory levies on the US.
"There was very little reaction to the FOMC minutes overnight, the market seems distracted by the trade wars. Trump has been out campaigning for various republican mid-term candidates so the rhetoric is not backing down but the market is in very complacent mood," says John J Hardy, Saxo's Head of Forex Strategy.
Some element of this complacency may be ascribed to the market's perception that fear of the tariffs might dissuade the Fed from hiking interest rates as much as was feared, Hardy adds. "Regardless, we have strong risk appetite, and the dollar is weakening as the correlation seems to be negative to risk for the dollar. We also have yen weakness."
The big ticket item on today's economic calendar is the monthly US employment report. "We're reaching levels coming into today's jobs report that are very interesting in a number of dollar pairs, including Aussie-dollar, euro-dollar and kiwi-dollar. This report looks important for setting up whether we're going to see the dollar spill over and extend its weakness for quite some time here or whether it's going to make a stand, Hardy concludes.
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.