Forex news for North American trading on June 24, 2021
- This global recovery is an exception to the 'sell USD' pattern - BofA
- Manchin: A reconciliation bill is inevitable
- WTI crude oil futures settle at $73.30
- Mexican central bank surprises with a 25 bps rate hike
- Infrastructure deal is $1.2 trillion - White House
- Natural gas prices hit a two-year high at a time of year when prices usually don't spike
- US still has serious differences with Iran on nuclear deal but talks will continue - - US State Dept
- Fed's Kaplan: Inflation is 'broadening out' to more sectors
- Fed's Bullard: 'Tangible' risk inflation could be even stronger than expected
- US treasury auctions off $62 billion 7 year notes at a high yield of 1.264%
- ECB's Schnabel: Short-term rates will stay low for substantial time.
- European shares see solid gains in trading today
- ECB's Schnabel: Incoming economic indicators are very strong
- Fed's Williams: Inflation will come down to about 2% next year and the year after
- KC Fed June manufacturing index 27 vs 24 expected
- Biden 'highly likely' to endorse bipartisan framework on infrastructure deal - report
- Building collapse near Miami will leave huge toll
- Fed's Harker: US economy is largely in good shape
- Fed's Barkin: Price pressure will ease in Q4
- Belgian June business sentiment hits record high at +9.8 vs +6.5 prior
- US Q1 GDP (third reading) +6.4% vs +6.4% expected
- US advance goods trade balance for May -88.1 billion versus -87.5 billion estimate
- US May prelim wholesale inventories +1.1% vs +0.8% expected
- US initial jobless claims 411K vs 380K estimate
- US May prelim durable goods orders +2.3% vs +2.8% expected
- The NZD is the strongest and the GBP is the weakest as NA trader enter for the day
President Biden, along with a bi-partisan group of centrist Senators, agreed to a infrastructure package of $973 billion over five years, and $1.2 trillion if continued over eight years. The package would fund improvements to roads, bridges, transit, airports and enhanced infrastructure for broadband, water and electric vehicles. What it did not include, were "human infrastructure" programs that were part of the Presidents election promise such as child care, elder care, and education provisions.
The Democrats are already working on a 2nd infrastructure bill that would be north of $2T and include these human infrastructure provisions.
How would they pay for the first tranche?
Some sources of funds comes from:
- $100 billion through public-private partnerships and direct-pay municipal bonds,
- $100 billion by investing $40 billion to tighten enforcement at the Internal Revenue Service to collect taxes that are owed but not paid.
- They also repurposed about $80 billion from prior pandemic relief bills to pay for the package. That amount goes up to $125 billion when including previously approved broadband funding and other monies coming from states returning unused unemployment benefits.
The expectations for plan sent stocks higher at the opening. The S&P index and NASDAQ both opened at record levels and remained above those levels throughout the trading day. The biggest gain or the day was the Dow industrial average which it rose 322.58 points or 0.95%. The high for the day extended up 1.06%. The NASDAQ index increased 98 points or 0.69% and reached and intraday high of +1.0%. The S&P index rose 24.86 points or 0.59% after peaking intraday with a gain of 0.7%. The small-cap Russell 2000 index was also up sharply on the day (up about 1.3%)..
In the European equity markets today, the major indices also closed solidly higher with the Spain's ibex up 1.34%, and Italy's FTSE MIB up 1.38%. The UK's FTSE 100 only gain 0.51% and was the biggest laggard for the day.
In the forex market, the NZD was the strongest of the major currencies, while the GBP was the weakest. The GBP was hit just before the New York traders enter for the day on the back of a less hawkish BOE. Although the pound remain the weakest of the majors, it did recover in the New York session closing off the low levels for the day. The EURUSD, USDCHF, AUDUSD and NZDUSD all had narrow trading ranges between 26 pips (for USDCHF and AUDUSD), and 38 pips (for the EURUSD). The US dollar was little change (0.14% or less) versus the EUR, JPY, CHF, AUD and CAD. The USD was up 0.25% vs the GBP and down -0.23% vs the NZD.
Economic data today was mixed:
- Durable goods rose 2.3% but was less than the to bring 8%. Capital goods orders nondefense ex air fell -0.1% versus 0.6% expectations, but that comes after a revise gain of 2.7% versus 2.2% initially reported last month.
- First quarter GDP third division came in as expected at 6.4%. That was the same as the second revision. Personal consumption the first quarter rose 11.4%. The GBP price index rose 4.3% while the core PCE increase by 2.5%
- Initial claims remain above 400K for the second consecutive week. Last week it was at 418K. Today it was at 411K versus expectations of 380K. Continuing claims though did reach a new post pandemic low of 3390K versus 3534k last week
- The trade balance was worse than expected $-88.1 billion versus -$87.5 billion estimate. That is the second largest deficit on record, but you can argue that the pandemic and reopening/supply side issues could have been big impact. Time will tell.
In the US debt market, yields are ending mixed with some quirky changes in the yield curve. The five year yield was up 3.2 basis point. The 10 yield was up 1.0 basis points but the 30 year yield was down -0.4 basis points. The US treasury was successful in auctioning off $62 billion of seven year notes at 1.264%. There was strong demand from domestic and international buyers with a bid the cover comfortably above the six month average.
