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Morning Call: Softer dollar boosts commodities, stocks

Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.

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Article / 12 July 2017 at 7:00 GMT

Morning Markets: USD slips on Trump Jr. email uproar

John G Acher

Consulting editor / TradingFloor

Norway

Watchlist

UK: Monthly unemployment figures (0830 GMT)
EU: Industrial production (0900 GMT)
Portugal: CPI (1000 GMT)
Canada: BoC interest-rate decision (1400 GMT)
US: Atlanta Fed Business Inflation Expectations (1400 GMT)
US: Fed's Yellen testimony to House financial services committee (1400 GMT)
US: EIA weekly petroleum status report, incl. crude oil stocks (1430 GMT

US stocks clawed back most of the day's losses by the closing bell on Tuesday, but the US dollar remained soft overnight against Asian and other currencies. The weakness in US markets was caused by worries that the risk of impeachment of US president Donald Trump has risen after his eldest son, Donald Trump Jr, released emails that some news reports said could be a "smoking gun" in the investigation of the 2016 Trump presidential campaign's dealings with Russians.

The startling revelations threw into new light a June 2016 meeting between Trump Jr, campaign boss Paul Manafort and the president's son-in-law, Jared Kushner, and Russian attorney Natalia Veselnitskay at Trump Tower in New York.

The performance of Asian stock markets was mixed on Wednesday. In upbeat Hong Kong, a surge in financial stocks entered its third day, driving the Hang Seng index up through 26,000 points. But the cheer was not felt in China where the Shanghai Composite lost ground. And equities dropped in Australia as worried investors offloaded banking shares in particular. Japan's Nikkei 225 tumbled as well.

Oil enjoyed a late-day boost on Tuesday on reports that US crude inventories fell by more than 8 million barrels last week.

Financial markets keenly await US Federal Reserve chief Janet Yellen’s semi-annual testimony to Congress, which starts today and continues on Thursday. Yellen's testimony is scheduled to be released in writing at 1230 GMT, followed by her testimony 90 minutes later.

Market signals

Asian session

Donald Trump Jr released an email chain of a Russian offer of material on Clinton
Investors are hesitant ahead of Fed chief Yellen's Congress testimony later today
Traders are awaiting today's interest rate hike decision by the Bank of Canada
Japan's Nikkei 225 retreated; it was down by 0.40% to 20,115.43 at 0540 GMT
The Shanghai Composite lost ground; it was down 0.45% to 3,188.57 at 0601 GMT
A liquidity boost from PBoC has lifted financials in Hong Kong, driving an extended rally
Hong Kong's Hang Seng soared yet again; it was up 0.60% to 26,032.00 at 0601 GMT
Westpac-Melbourne Institute Index of Aussie consumer mood up 0.4% but still below 100
Iron ore prices rise for a third day to their highest in more than two months
Australia's S&P/ASX200 took a tumble; it closed down by a hefty 0.98% at 5,672.70
But top miners including BHP Billiton defied the wider gloom on the ASX

Forex ahead

The US dollar lost ground after the release on Donald Trump Jr emails
USD retreated against the yen; it was worth just ¥113.4120 at 0507 GMT
AUD rallied as USD fell and iron ore firmed; it was worth 0.7654 at 0507 GMT
CAD slipped against USD ahead of the Bank of Canada interest rate decision

From the Floor

USD drops. “The dollar selloff continued, mainly on dollar-yen,” says Horchani.

Yellen testifies. “The key here is not whether, but the guidance on rate hikes,” says Hardy

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1...2...3
The UK jobless rate should tick down to 4.5% but the claimant count is more worrisome, writes James Picerno.

Trump-Russia smoking gun?
Donald Trump Jr's email chain rattled the US dollar, which slipped 0.2% against the yen, and Asian markets were mostly lower, writes the team at Saxo APAC Sales Trading.

Commodity bright spot
The Australian market digested the Trump Jr emails but miners were lifted by a rally in the iron ore price, writes the team at Saxo APAC Sales Trading.

US Capitol in Washington

US Capitol building ... Markets will pay close attention when Fed chief Janet Yellen goes to Congress today, to deliver the first part of her two-day testimony. Photo: Shutterstock

Morning Markets goes out on the TradingFloor platform at 0700 GMT, Monday to Friday.
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