Wall Street plays catch up, dollar falls
Once again, the mood on Wall Street is setting the tone for Europe as the impressive rebound in US stocks are helping equities on this side of the Atlantic. US markets remained closed yesterday as it was a public holiday, but now those traders are back to work, they are playing catch up. In keeping with recent times, the US tech sector is the most volatile as the NASDAQ 100 is leading the charge higher. The tech-heavy index is up over 3%, but that needs to be put in context with the 20-month low it dropped to last week. European equities are up for a third day in a row as worries about a cooling of growth have been put on hold for now. The latest US housing data underlines the problems facing the world’s largest economy as existing housing home sales in May were 5.41 million – a new 22 month low. Reports like that contribute to the view the US might be on track for a recession.
The Australian dollar received a boost overnight following the release of the minutes from the latest RBA meeting, also assisting the currency was the speech from Philip Lowe – the RBA Governor. The bank hiked rates by 50 basis points to 0.85% earlier this month, and the minutes from the meeting indicated that rates will be lifted at next month’s meeting. Rising inflation is a problem across the global, and Australia is no exception as CPI is already at a 30-year high in Australia, and the central bank expects it to hit 7% by the end of the year. The Aussie dollar ticked up in the wake of the Lowe speech and the RBA minutes, and it also helps that iron ore and copper are showing respectable gains.
The US dollar index is in the red again following the five-year high it hit last week. The US 10-year yield is slightly higher at 3.28% but it is way below the 3.48% level that was posted last week, which is a major factor in the weakness of the greenback. Although the dollar is in the red today, it remains in its broader bullish trend.
Gold is slightly lower this afternoon on account of the bullish sentiment in equity markets. it says a lot about the absence of buying appetite for the metal when it can’t even muster a rally when the greenback is down over 0.25%.