US equities higher but US dollar just won't weaken

Good morning

The UK looks set to open up next week despite Covid infection cases rising. The key remains whether vaccinations help prevent the majority of cases turning into serious illnesses, specifically reducing hospitalisations, and for those who do require hospital treatment, to limit the number of fatalities. There, not much to ask. What remains clear though is Covid-19 is as rife as it ever was despite the various lockdowns greatly slowing down the rate of infection. Take care.

US 10 year yields are down at 1.35% and were actually lower than that for a time last week, reaching as low as 1.25%, quite some way off the March highs near 1.8%. The market is perhaps beginning to believe the Fed when they say rate rises are a long way off. US equities are enjoying the better risk sentiment, S&P and DJIA making record highs.

The US dollar is broadly unchanged, I’d really expect to see a little more weakness given the yields and equity prices. GBPUSD just hasn’t been able to hold breaks up through the 1.3900 area during July, EURUSD has a similar issue around 1.1900. GBP is managing to hold gains against the single currency, EURGBP down at 0.8545 (GBPEUR 1.1700).

US inflation numbers out this afternoon while UK inflation is out early tomorrow morning. We do have the RBNZ rate announcement overnight, no changes expected this time but there are many who see Nov 2021 as possible for a rate rise, we’ll be looking for any clues as to whether RBNZ agrees. General feeling is NZD gains may be limited, this time last week NZDUSD was up at 0.7100 and we’ve not really been much above there for a month. I don’t think this is the time for a break higher unless it is due to USD weakness across the board.

- 13.30 US CPI

- 19.00 US monthly budget statement

- 01.30 AUS Westpac consumer confidence

- 03.00 RBNZ rate announcement

- 05.30 Japan industrial production

- 07.00 UK CPI, RPI, PPI