What Happened Today

<div><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEistV3j-bnNj9RjBVG4Qpl0YCGeYi8ZjAlqvh3lwjY23GJqjYqjXlY2GZDVyiCP-OPFfpxIQlR1GLY13hHdAlPIHAwxtQlnZ8U0C9D-55qx6pu0kVx7pwnt2bX4KXUmh0XgOVnuAHKar9AHJvbDJzGBZYjKPgrMrv_gE_XSulEvC40RSSjkdEO_zdk2lEkX/s257/fireworks%201.jpg"><img alt="" border="0" data-original-height="197" data-original-width="257" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEistV3j-bnNj9RjBVG4Qpl0YCGeYi8ZjAlqvh3lwjY23GJqjYqjXlY2GZDVyiCP-OPFfpxIQlR1GLY13hHdAlPIHAwxtQlnZ8U0C9D-55qx6pu0kVx7pwnt2bX4KXUmh0XgOVnuAHKar9AHJvbDJzGBZYjKPgrMrv_gE_XSulEvC40RSSjkdEO_zdk2lEkX/s400/fireworks%201.jpg" width="400" /></a></div><p><span><b><span>The US dollar was mostly softer. </span></b><span>The
New Zealand dollar was the strongest (~0.85%) helped by cross rate gains
against the Australian dollar, following the RBA’s decision to stand pat. The
Australian dollar fell to one-month lows below NZD1.08. There is scope for
another 0.5%, or so to the next target near NZD1.0750. The RBA’s decision to
leave its cash target at 4.10% was not surprising, and despite the hawkish
rhetoric, the market downgraded the chances of a hike in Q3, though has it
priced into Q4 and about a 50% chance of another hike too. The Australian
dollar recovered from almost $0.6640 to $0.6700.</span></span></p>

<p><span><b><span>The PBOC is stepping up its effort to slow
or stem the yuan’s weakness. </span></b><span>It set the dollar’s
reference rate at CNY7.2046 vs. expectations for CNY7.2361. There are reports
that Beijing is considering a repo market for foreign investors in Chinese
bonds. China will require export licenses for gallium and germanium (and
related items) starting August 1. These metals are needed for semiconductor
chips, radar, and other electronic equipment. It is seen as retaliation for the
US-led effort to ban high-end chip exports, fabrication equipment, and new
sanctions on cloud services. This escalation of tit-for-tat cones on the eve of
Treasury Secretary Yellen’s visit to Beijing. <o:p></o:p></span></span></p>

<p><span><b><span>Japanese officials are slowly climbing the
intervention ladder. </span></b><span>The early rungs are different types of
verbal intervention. Nikkei reports that Japan is in close communication with
the US Treasury also seems to bolster the risk of intervention. The market has
shied away from the JPY145 level. <o:p></o:p></span></span></p>

<p><span><span><b>The Stoxx 600 eked out a small gain and European bonds
a bit heavier.</b> Greek and Italian 10-year yields rose 4-7 bp, while the others
were mostly 0.5-1.5 bp higher. Gilts rallied with yields falling 4.5 bp. <o:p></o:p></span></span></p>

<p><span><b><span>Germany reported a smaller than expected
May trade surplus (14.4 bln euros vs expectations for 17.3 bln) and the April
surplus was revised to 16.5 bln euros from 18.4 bln. </span></b><span>Exports
unexpectedly declined (-0.1%) for the first time since March. Imports, which
had been expected to be flat were up 1.7% and April imports were revised to
-0.1% from -1.7%. Any further economic disappointment risks stagnating or worse
in Q2 after contracting by 0.5% in Q4 22 and by 0.3% in Q1 23. <o:p></o:p></span></span></p>

<p><span><b><span>The US bill auctions on Monday were
greeted with strong demand. </span></b><span>The indirect bidders took
down the most since mid-April. About 2/3 of the bill supply since the debt
ceiling drama have been covered by the decline in the reverse repo. That means
the tightening of financial conditions may not be as much as feared. Still, it
may be too early to draw hard conclusions. The 2-year/10-year yield curve has
grown more inverse, now around -111 bp. <o:p></o:p></span></span></p>

<p><span><b><span>The dollar was sold to a new marginal
multi-year low against the Mexican peso, slightly below MXN17.02. </span></b><span>A
series of better data, including a better June manufacturing PMI (50.9 vs 50.5
in May), a new record worker remittances ($5.69 bln in May), stronger IMEF
survey surveys and a jump in June vehicle sales (113.5k vs.102.7k in May and
90.3k in June 2022). It is difficult to take about meaningful support when the
greenback is at levels not seen since December 2015. However, the next big
target may be MXN16.35-50. <o:p></o:p></span></span></p>

<p><b><span><span>Canadian markets were closed Monday</span></span></b><span><span>.
The market leans toward a hike on July 12. The US dollar made a marginal new
4-day low against the Canadian dollar just above CAD1.3200. That is roughly the
halfway point of the bounce from the nine-month low in late June (~CAD1.3115)
to high from the end of last week (~CAD1.3285). The next retracement is around
CAD1.3180.</span></span></p><p><br /></p><p><a href="http://www.marctomarket.com/p/disclaimer_28.html" target="_blank"><span>Disclaimer</span></a></p><p><br /></p><div><br /></div><p></p>