Forex news for New York trade on July 19, 2021:
- US July NAHB housing market index 80 vs 82 expected
- Fauci: Delta variant is becoming more dominant
- Vallance corrects himself: Says 60% of hospitalizations are from UNvaccinated people
- BBC: US CDC raises UK to highest risk level
- Fauci: Delta variant is becoming more dominant
- Biden: Supply chain disruptions are temporary
- New BOE MPC member Mann: We must not be premature with tightening monetary policy
Markets:
- Gold flat at $1811
- WTI crude down $5.22 to $68.37
- US 10-year yields down 11 bps to 1.190%
- S&P 500 down 70 points to 4256
- JPY leads, NZD lags
There's no sugarcoating this one, it was ugly. The risk trade was wilting as New York arrived but then a fresh bid into bonds sent it over the edge. There wasn't any single thing that sparked the trouble but it's increasingly clear that covid worries are behind the recent pain.
The US dollar didn't exactly straight-line it as euro and yen-funded carry trades were closed out early in New York, leading to snap back rallies in both (particularly the euro) but the US dollar reasserted itself later on safe-haven flows.
The most-unfortunate incident of the day was the UK chief scientific advisor Vallance saying that 60% of hospitalized people were double vaccinated. Four hours later he sent a tweet to say 60% are actually unvaccinated. That was a major clunker but I don't think it had a huge effect on trading.
An early tell of the pain to come more-broadly was in the loonie as USD/CAD spike up to 1.2800 in a blow out on stops. There's a school of thinking (and some data) that argues that CAD moves preceed oil moves and that is certainly looking smart today as oil crumbled later.
AUD and NZD played catch-up with the loonie later and both finished just off the lows (as some equity dip buyers arrived late).
It's going to take some time to sort this one out.
