OVERNIGHT NEWS
* Stocks, bond yields, oil, AUD rebound from overnight slump after Trump corrects advisor Navarro comments, confirms trade deal with China is still ‘fully intact’, advisor Navarro earlier in interview declared deal with China was ‘over’ ‘
* France June composite PMI jumps from 32.1 to 51.3, Australia advances from 28.1 to 52.6, Japan climbs from 27.8 to 37.9
* SNB vice-president Zurbrugg in NZZ : in principle no upper limit to FX intervention but based on risk/ benefit analysis
* Day ahead: EU/UK.US PMIs, Macron/ Rutte meeting ups stakes for EU Recovery Fund; Hungary CB to stand pat on rates
* Nikkei +0.6%, EUR 10y IRS unch at -0.16%, Brent crude -0.46% at $42.88/b
France and Australia PMI composite back above 50
GLOBAL
*Trump Says China Deal ‘Fully Intact’ After Navarro Roils Markets
*New infections in Florida rose to another high and Texas Governor Greg Abbott said contagion was accelerating at “an unacceptable rate.”
*U.S. Set to Announce Aluminum Tariffs on Canada by End of Week
*U.S. Imposes Constraints on Four More Chinese Media Outlets
*9:45am: June Markit US Manufacturing PMI, est. 50, prior 39.8
*10am: May New Home Sales, est. 640,000, prior 623,000
*U.K. set for a further relaxation of virus restrictions
*Japan is aiming to conclude its current trade negotiations with the U.K. by the end of next month,
*Spain is weighing plans to significantly increase the size of its 100 billion-euro ($113 billion) loan-guarantee fund
*The June Purchasing Managers Index from IHS Markit showed an improvement at the eurozone’s manufacturers and service firms, and confidence at the highest since February
*The Indian and Chinese militaries arrived at a mutual consensus during Lieutenant General-level talks
*Singapore called for an election amid the pandemic
El USD débilfrente a las divisas del G10
Los mercados financieros han comenzado la semana registrando un comportamiento mixto con un sentimiento
de mercado relativamente firme después de que Pekín haya comunicado únicamente nueve nuevos casos de
COVID-19, cifra que sugiere que el reciente brote en la ciudad ha sido contenido. En cualquier caso, las tasas de
infección por coronavirus continúan generando preocupación en otros países, entre ellos Alemania, EE.UU. o
Brasil. Mientras que ayer las materias primas terminaron la sesión con ganancias, sosteniendo con ello la demanda
de divisas de alto beta, el JPY y el USD registraron los comportamientos más débiles del G10.
La llegada del verano en el hemisferio norte trae algo de impulso a las divisas de LatAm
El comienzo del verano y el tiempo cálido en EE.UU. han renovado el apetito por el riesgo y por las divisas de
LatAm al comienzo de la semana. La debilidad del USD y las ganancias en los precios de las materias primas
beneficiaron a las divisas de alto beta de LatAm el lunes, pero lo hicieron de una forma desigual. De hecho, una
confianza y direccionalidad más limitadas en los mercados han generado una cierta consolidación, pero también
la aparición de algunos catalizadores secundarios. Los mismos factores que provocaron el comportamiento más
débil del CLP y PEN la pasada semana se han visto el lunes, concretamente, los cambios en posición en las
carteras de fondos de pensiones locales y la ausencia de ventas de USD por parte del Tesoro chileno en el caso del
CLP, y una demanda limitada y un banco central proclive a permitir una cierta depreciación en el caso del PEN.
Con todo, el optimismo de las divisas de alto beta parece continuar ignorando los débilesfundamentales de la región, ya que cuatro países de la LatAm copan los cuatro primeros puestos del ranking de las diez naciones con
más nuevos casos de COVID-19 y amplían la recesión. Las divisas de LatAm también prestarán atención al ruido
derivado de las relaciones comerciales entre China y EE.UU., ya que la región también ha sido sensible a ellas
desde una perspectiva fundamental (en los casos del CLP, el PEN y el BRL) e incluso desde un punto de vista de
riesgo (en los casos del MXN y el COP).
Markets during the Asia morning were met with a bout of volatility on comments from US Trade Adviser Navarro that the Phase 1 US-China trade deal was “over.” Risk quickly sold off across the board on this, however, comments were soon walked back by Navarro who said he had been misinterpreted. President Trump himself also quelled fears, stating that the deal was still intact. This roundtrip for risky assets sees the USD once again marginally offered and equities broadly in the green after a strong NY session.
On the data front, AUD PMIs on aggregate returned to expansionary territory, setting a positive scene for the EUR, GBP and USD prints due later today. We also get snippets of sentiment and housing data in USD. Central bank speak is due in GBP and USD too. Over in EM, BRL awaits BCB minutes and a speech by BCB President Campos Neto, HUF sees a rate decision (hold) and TWD awaits IP data.
After a choppy night for risk appetite, the FX market seems disinclined to echo the
“risk on” mood in equity markets this morning. The risk-sensitive portions of the FX
market moved in tandem with the overnight confusion surrounding the US-China trade
deal. However, where European equities seem to have responded enthusiastically to
better than expected PMI readings for June, the FX market is less enamoured, perhaps
because many readings remained sub-50. There are also grounds for caution
elsewhere, be it reports of new US tariffs on Canada, or accelerating COVID-19 case
counts in part of the US as the global pandemic numbers rise above 9m. Many parts of
the FX market did a round-trip during the US-China trade deal confusion. The lack of
additional follow through in “risk on” FX this morning seems appropriate given the still
uncertain picture painted by the PMIs.