Well needless to say, Donald Trump’s comments in the Wall Street Journal (which hit at ~3:17 EST on Wednesday) set the tone for overnight trading, but as is usually the case with knee-jerk reactions, there was some fading evident.
“The Bloomberg Dollar Spot Index rebounded in thin volumes after hitting its lowest level in two weeks on the back of President Donald Trump’s comments that the greenback was getting too strong,” Bloomberg writes this morning adding that the dollar nevertheless “dropped a fourth day, on its longest run of declines in three weeks, and stood almost 5 percent lower than its year- to-date high during the Asia session.” FX traders (which I assume are carbon-based since they spoke to Bloomberg) said the long-squeeze took a break because, well, because there are only so many dollar-longs (i.e. positioning isn’t extreme). While “at the same time, investors looked to square positions ahead of the Easter holidays.”
“It’s difficult to continue selling the dollar ahead of next week’s events as Mnuchin, who has kept traditional stance of supporting a strong dollar, will be asked for accountability at next week’s G-20 meeting in Washington,” SocGen’s Kyosuke Suzuki adds.
Meanwhile – and this is hilarious – the dollar pared losses and yields rose in a relief move that started at around 12:01 a.m. when it became apparent that the “big event” Kim Jong-Un promised for Thursday was in fact “the opening of a new street.” No, that is not a joke. Have a look at this:
“U.S. 10-year Treasury yield fell to as low as 2.22%, while USD/JPY fell to as low as 108.73, both fresh 5-month lows [but] USD/JPY pared earlier losses after Reuters tweeted that North Korea’s big event today was ‘the opening of a new street,'” Bloomberg notes, recounting the action.
Here’s what we’re looking at post-Trump WSJ comments:
Meanwhile, the onshore yuan rose as much as 0.28% to 6.8740 per dollar, the highest intraday level since March 27 after Trump said he wouldn’t label China a currency manipulator and that the dollar is too strong. It’s also worth nothing that the PBOC resumed reverse repo sales after a 13-day hiatus.
The offshore yuan rose for a third day, while one month CNH Hibor fixed down 33 bps to 3.5665%, the lowest since November.
As for crude, the market is trying to figure out what to do with the IEA’s monthly report which says global inventories rose in 1Q. They also trimmed estimates for oil-demand growth. “The IEA has a more aggressive view than OPEC on the global balances and one that calls for stock draws in all the quarters,” Olivier Jakob, managing director at consultants Petromatrix GmbH said overnight. “Despite OPEC cuts, global inventories showed a bigger- than-expected build in 1Q,” Bernstein’s Neil Beveridge added. “Recent data, however, points to sharp inventory declines in 2Q.” Here’s pretty much everything you need to know:
- IEA monthly report shows OPEC improved its compliance with pledged cuts though inventories still rose during 1Q.
- IEA report wrap: Inventories rose despite OPEC cuts in 1Q
- IEA, OPEC both show March cutback compliance of 104%
- Non-OPEC nations in pact improved compliance, too; to 64%
- Brent-Dubai spread drops below $1/bbl to lowest since August 2015 as OPEC cuts bite
- U.S. crude stockdraw in Wednesday’s EIA report disappointed bulls amid Cushing glut and rising production
- Baker Hughes weekly U.S. oil rig data due later today (day early due to holiday)
As for the market, well, we’ve given back all of the “Saudi Arabia supports extending production cuts” headline rally.
Asian shares were mixed, while Europe is broadly lower.
- Nikkei down 0.7% to 18,426.84
- Topix down 0.8% to 1,468.31
- Hang Seng Index down 0.2% to 24,261.66
- Shanghai Composite up 0.07% to 3,275.96
- Sensex down 0.3% to 29,544.35
- Australia S&P/ASX 200 down 0.7% to 5,889.95
- Kospi up 0.9% to 2,148.61
- FTSE 7302.55 -46.44 -0.63%
- DAX 12110.75 -43.95 -0.36%
- CAC 5070.95 -30.16 -0.59%
- IBEX 35 10295.20 -65.30 -0.63%