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Sterling And Antipodeans Trade Higher

Jul. 13, 2017 7:09 AM ETUUP, FXE, FXY, FXB, FXA
Marc Chandler profile picture
Marc Chandler


  • Euro and yen are little changed while sterling and dollar-bloc are firmer.
  • Media missed that Sept. and Dec. Fed funds futures were unchanged yesterday, which suggests no change in perceptions of policy trajectory.
  • China's exports and imports were stronger than expected.

The US dollar is mostly consolidating yesterday's move. Sterling is pushing back through $1.29 as the hawks on the MPC may not have been dissuaded by disappointing PMI readings and the softer earnings growth. The table is being set for another 5-3 vote at next month's MPC meeting.

The Australian and New Zealand dollars are up about 0.6%, gaining nearly twice as much as sterling. The risk-off sentiment, softer yields in the US and Europe, and strong Chinese import data are among the drivers. The Australian dollar surged through the $0.7700 level to challenge a 15-month down trendline that is found near $0.7725. The high for the year was set in March at $0.7750.

China reported a 17.2% year-over-year increase in imports. The median forecast in the Bloomberg survey was for a 14.5% pace after 14.8% in May. Exports rose 11.3%, up from May's 8.7%, and stronger than expected. The trade surplus rose by more than a third from a year ago to $42.8 bln. China's surplus with the EU is 60% larger at $11.4 bln while the trade surplus with the US is nearly 90% larger at $25.4 bln.

Two elements are politically charged. The first is China's steel and aluminum exports. Steel exports slipped to 6.81 mln tons from 6.98 mln in May. Unwrought aluminum and aluminum product exports were unchanged at 460k tons. The second is a trade with North Korea. Chinese figures point to an 11.3% decline in imports from North Korea in H1, which includes the period before sanctions were implemented. Chinese exports to North Korea rose by nearly 30%, but note that not all goods are sanctioned, and these are consumer goods like textiles.

Many observers looked at the decline in US bond and note yields and concluded Yellen was dovish. However, we note that

This article was written by

Marc Chandler profile picture
Marc Chandler has been covering the global capital markets in one fashion or another for 25 years, working at economic consulting firms and global investment banks. A prolific writer and speaker he appears regularly on CNBC and has spoken for the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. In 2009 Chandler was named a Business Visionary by Forbes. Marc's commentary can be found at his blog (www.marctomarket.com) and twitter www.twitter.com/marcmakingsense

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