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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 / 27 July 2017 at 7:00 GMT

Morning Markets: USD walloped by dovish Fed, EURUSD up through 1.17

John G Acher

Consulting editor / TradingFloor

Norway

MM TABLE

Watchlist

Germany: GfK consumer climate survey (0600 GMT)
Spain: Economically active population survey (0700 GMT)
Eurozone: Monetary developments in the euro area, M3 (0800 GMT)
South Africa: PPI (0930 GMT)
UK: Distributive trades survey (1000 GMT)
Canada: Payroll employment, earnings and hours (1230 GMT)
US: Weekly jobless claims (1230 GMT)
US: Durable goods orders (1230 GMT)
US: Chicago Fed national activity index (1230 GMT)
US: EIA weekly natural gas storage report (1430 GMT)

The US dollar dropped against major currencies, with EURUSD jumping above 1.17, after the US Federal Reserve on Wednesday kept rates unchanged, as expected, and said it is prepared to begin unwinding its balance sheet "relatively soon".

Perceived dovishness in the Federal Open Market Committee's statement rumbled the USD and helped spark a rally on Wall Street where the Dow, the S&P 500 and the Nasdaq Composite set new record closing highs on Wednesday.

In a heavy week for quarterly earnings, Facebook shares rose after the social media group posted forecast-beating second-quarter results. E-commerce giant Amazon and social media group Twitter are scheduled to report quarterly earnings on Thursday.

Oil and metals prices rose, with Brent crude checking out $51/barrel and gold climbing to a six-week high during Asia trading.

Market signals

Asian session

Asian markets were mostly higher after the Fed held rates steady
USD retreated and Treasuries climbed on the Fed's inflation comments
Japan's Nikkei 225 rebounded into positive territory after an early slide
Korean GDP growth slowed to just 0.6% in Q2, down from 1.1% in Q1
Korea's Kospi Composite index headed higher
Australia's export price index fell 5.7% for the quarter, while import prices fell 0.1%
Spot gold climbed as high as $1264.90/oz
Iron ore price rose to be above $70/tonne
Large gains for miners buoyed the S&P/ASX200

Forex ahead

AUD regained its upward momentum on USD weakness, and rose above 0.80
USD fell against most major currencies following the FOMC statement

In opinion

1...2...3
The US economy is struggling with several challenges, but at least a recession is unlikely in the foreseeable future, says James Picerno.

Ore price boost
The spot iron ore price has soared higher on expectations of stronger Chinese steel demand, in a move will benefit top Australian miners, says the team at Saxo Capital Markets Australia.

Forex impact
Dovish comments from the Fed have set a cat among the forex pigeons, with almost every major currency rising against USD, says the team at Saxo APAC sales trading.

Welcome USD weakness
The FOMC will welcome the weakness in the US dollar that resulted from its dovish comments, as the slide in the USD should give inflation a lift, says Max McKegg.

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GDP growth in South Korea, the fourth largest economy in Asia after China, Japan and India, slowed in Q2 on lower exports and construction investment. Photo: Shutterstock

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