Range Trading Day

The US dollar is narrowly mixed in relatively quiet, though choppy, trading. The euro has largely been confined to a $1.1920-$1.1990 trading as the market awaits fresh trading incentives. There is some talk of Asian sovereign interest in the single currency, though market sentiment remains overwhelmingly bearish. The dollar-bloc is seeing yesterday’s gains pared, but here too a consolidative tone is evident. Sterling and the yen are also little changed in fairly narrow trading ranges. More of the same can be expected in North America today.

Global equities found little succor in the US equity market recovery yesterday after testing the Flash Crash low from May 25th. The MSCI Asia-Pacific Index fell 0.7%. The Nikkei fell 1% following reports that Japan’s Prime Minister Kan has distanced himself from the DPJ party manifesto that called for a cut in corporate taxes. On the other hand, the Shanghai Composite rose 2.8%, the most in a couple weeks, aided by reports that government officials have hinted at relatively strong data, including strong exports. The data are expecting starting tomorrow. European bourses initially moved higher, but reversed lower by mid-morning in London. Consumer services, industrials and financials were holding on to minor gains, but the other major sectors were lower, with oil and gas and utilities the heaviest.

Global bond markets are fairly quiet, allowing for some slight narrowing of peripheral spreads against German. German and Portugal provided supply today and it was relatively easily absorbed. The Reserve Bank of Australia reaffirmed market expectations that the RBA is on hold for some time (12-month OIS suggests 12 bp tightening priced in). New Zealand central bank is widely expected to hike its cash rate late today (21:00 GMT). Brazil’s central bank meets as well and the market expects another 75 bp rate hike will be delivered.