FOMC: Pardon the interruption
The FOMC interlude was even less of an event than expected but that belies some of the headline risk creeping back into play, as the market has been waiting for a Whitehouse press release on China tariffs which has left investors to speculate if this will confirm the overnight chatter the US is proceeding with USD 16 bln in tariffs.
US equities market have struggled all NY session despite a strong showing by Apple as US-China trade headlines started to sound alarms from the NY cash markets open.
On the other trade front, however, Canada and Mexican officials are “harnessing the power of trade agreements to promote higher wages” undoing some of the aggressive US rhetoric that was suggesting the US administration was on the cusp of freezing Canada out of NAFTA talks.
Oil had been moving lower all session on the back of reports OPEC and Russian crude oil production rose during July, while a larger than expected DOE inventory build confirmed the API reports from Tuesday. While not quite as large as the API survey suggested it was still very bearish correlative to market expectations. US Crude oil exports have\ fallen right off the table from last week 2.7 million barrels per day to only 1.3 million barrels per day while clocking the slowest reading since April.
Oil traders were caught long and wrong by the surprising increase in OPEC production and more significant than expected US Crude inventory builds. The downward spiral halted when headlines surfaced the Iran Revolutionary Guard was planning a substantial exercise within 48 hours in the Persian Gulf in a show of force to bespeak its ability to close Strait of Hormuz, a primary oil artery.
Gold prices have had another down day. Outside of some short covering into the FOMC, the yellow metal has been trading offered from the get-go with selling showing few signs of abating. US 10 year yields are trading above 3 % while the Feds are set to raise interest rates next time around which is lending support to the USD. Given that Gold is more or less trading at the dollar mercy and with USDCNH inching towards 6.84 in late NY trade gold is heading lower.
JPY: The Yen has traded stronger today in part due to JGB yields moving higher. But with US stock markets trading with offered bias, a tinge of risk aversion is creeping in the USDJPY space.