U.S. equity markets struggle for a reason to break higher, USD makes gains but trades in narrow ranges versus its main peers
Investors and traders of USA equities struggled to discover renewed justification to push the leading indices above the recent highs during Monday’s New York session, at 19:00pm U.K. time the SPX traded down -0.10% as the NASDAQ tech-index traded up 0.04% posting a new record intraday high of 8,264. Although the main U.S. markets are pausing before investors find a reason to justify pushing stocks higher or take profits off the table, it must be noted that the NASDAQ is up circa 25% year to date and up over 40%+ since the December sell-off. Similarly, the SPX breached the psyche level of over 3,000 for the first time in its history last week and is up approximately 20% YTD. The only economic calendar event of note for the USA in the afternoon session on Monday July 15th concerned the latest Empire State Manufacturing metric which revealed a significant improvement of 4.3 for July, up from the shock reading of -8.6 printed in June.
The U.S. dollar traded in tight ranges against the majority of its peers as many institutional level FX traders begin to position themselves for the (supposed) odds on interest rate reduction the FOMC will announce at the culmination of their two-day policy meeting ending July 31st. At 19:20pm USD/JPY traded flat at 107.88, USD/CHF traded up 0.11% at 0.985 while USD/CAD traded up 0.13% as all three currency pairs oscillated in tight daily ranges. The dollar index, DXY, traded up 0.14% at 96.85 as price threatened to breach the 97.00 handle. Versus both antipodean dollars USD traded down, although the globe’s reserve currency clawed back some losses towards the end of the New York session; at 19:35pm U.K. time AUD/USD traded up 0.23% with NZD/USD trading up 0.43%.
Both antipodean dollars recorded significant gains versus their respected peers due to the latest Chinese Q2 growth beating forecasts. Despite Q2 growth coming in at 1.6% printing the worst Q2 reading in 27 years and causing year on year growth to fall to a six year low, FX traders and analysts bid up the value of AUD and NZD based on the countries’ close ties to China’s economic performance. China did provide evidence of cautious optimism due to its industrial production and retail figures beating expectations. Analysts may be whispering it quietly, but the world’s second largest economy and largest by growth appears to have easily weathered the initial impact of the Trump administration’s tariffs.
Sterling may trade in a holding pattern over many of this week’s trading session as market participants await the results of various high impact calendar events and data releases. Moreover, the dominant event which will dictate the medium term direction of GBP pairs such as GBP/USD will be the Tory party leadership battle, with Boris Johnson positioned to become leader and automatically installed as U.K. prime minister on July 22nd. At 19:50pm GBP/USD traded down -0.45% at 1.251 as price oscillated between the first two levels of support S1 and S2. Sterling fell versus all its main peers during the day’s sessions, as EUR/GBP rose by 0.38% threatening to break up through the 90.00 handle and round number.
Tuesday is a relatively quiet day for economic calendar events and data releases, at 9:30am the U.K. ONS will reveal the latest unemployment, wages and employment statistics. The jobless rate is forecast to remain at 3.8% on a three month basis, with 45K jobs created, wage rises are predicted to show a 3.5% year on year increase up to May. At 10:00am the latest balance of trade figure for the Eurozone is predicted to reveal an improved figure for May of €17.5b. The ZEW indices for Germany’s current situation and expectations in July are forecast to reveal a deterioration in sentiment. The Eurozone economic sentiment reading is predicted to remain close to the June reading of -20.2.
USA data published on Tuesday from 13:30 pm to 14:15pm includes the latest import and export prices for June which may have been impacted by the tariff trade dispute with China. Retail sales (advanced) are forecast to reveal a fall from 0.5% in May to 0.1% in June. Industrial production is expected to show a month on month fall to 0.1% from 0.5%. Manufacturing production is forecast to come in at 0.3% up from May’s figure of 0.2%.