Forex news for US trading on July 6, 2021
- ISM June services index 60.1 vs 63.5 expected
- US June Markit services final PMI 64.6 vs 64.8 prelim
- Biden closely watching the OPEC+ negotiations
- US Defense Dept cancels $10B JEDI contract with Microsoft
- Russian sovereign wealth fund cuts USD holdings to zero
- Treasury: US will continue to press G20 countries to use fiscal stimulus
Markets:
- Gold up $5 to $1797
- US 10-year yields down 7.4 bps to 1.358%
- WTI crude down $1.50 to $73.66
- S&P 500 down 10 points to 4341
- JPY leads, CAD lags
Coming into North American trade there was a solid bid in oil and commodity currencies while stocks were flat. As New York arrived after a long weekend though, the dollar got a bid. The catalyst wasn't exactly clear but soft ISM data led to some demand for safety, or added to it. Maybe it was the flag waving on July 4 but 'buy America' was in fashion as the market gobbled up bonds, sending a worrisome message about a return to low inflation.
At the same time, the oil trade reversed in a big way in a $4 swing from high to low, leading to heavy selling in the Canadian dollar as it briefly fell below the post-Fed lows.
If you look at the ranges in the chart below, they're wide, especially for what was expected to be a low volume day. The candles also paint some interesting pictures.
I tend to think this is one of the summer days where the puzzle pieces don't match up and not to overthink it but it's tough to ignore the price action in bonds.
The ISM data was below the lowest estimates so you can point to that, but if you drill into the report, every comment and underlying number is about capacity shortages, tighter margins and inflation, which doesn't exactly jive with buying bonds. Is this still short covering?
