"We have a pretty weak US dollar overnight and a stronger Aussia dollar after it got a boost from strong GDP growth showing a 3.1% advance in growth year-on-year during the first quarter," says John J Hardy, Saxo's Head of Forex Strategy.  "This throws the bearish case for AUDUSD into disarray." For the dollar, according to Hardy, the key point at this juncture is the degree to which the recent reversal back in the US 10-year yield was a false signal and part of the whole confusion and disruption from the EU sovereign debt and Italy situation. "If we start to see US yields rising again it'll be an interesting test for the markets."

In Italy itself, the new anti-establishment government has published a populist programme that would violate EU budget rules. "This could blow a 4% to 5% hole in the Italian budget deficit," Hardy says.

 
Source: Saxo Bank

Equity markets are mildly risk-on and the S&P 500+ has edged higher again with the 2,800 level being the next major resistance zone, reports Peter Garnry, Saxo's Head of Equity Strategy. "But though sentiment has improved short-term we remain neutral on equities. Next year, 2019 seems to be shaping up to be a year with a lot of trouble – we have the US fiscal stimulus that will end in 2019 at the same time that the budget deficit will massively increase supply of Treasuries at the exact same time we see the peak of the end of monetary stimulus from the Fed stimulus," Garnry warns.

In commodities, meanwhile, a potentially troubled Opec meeting awaits on June 22 in part because the US has quietly asked the bloc for a 1m barrels/day increase to counter disruptions – partly caused by its own sanctions against two members, says Ole Hansen, Saxo's Head of Commodity Strategy. The November midterm elections are looming and rising retail gasoline prices (now the highest since 2014) could attract some difficult headlines for Trump and the Republicans. "The oil upside is likely to be limited ahead of the meeting," he adds.

Finally, gold remains glued to $1300/oz as a softer dollar helps to offset nervousness ahead of the June 13 Federal Open Market Committee rate hike. A break of either $1286 or $1308 would likely determine the near-term direction.

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