Daily reviews


Dollar on the defensive, a July rate cut is a foregone conclusion


Official data on Friday showed that China’s exports fell 1.3% in June from a year ago while imports fell 7.3% in the same period versus -2% and -4.5% expected.

  • Asian equities trimmed early losses towards the end of the week
  • US stocks registered fresh all-time highs
  • Dollar knocked down by Fed’s dovishness
  • Euro rises despite a dovish ECB meeting minutes
  • Markets expect the Fed to cut rates in July despite strong data
  • Oil supported by lower US stockpiles, weather, geopolitics

Asian equities

Official data on Friday showed that China’s exports fell 1.3% in June from a year ago while imports fell 7.3% in the same period versus -2% and -4.5% expected. In the first half of the year, China’s total trade with the U.S. was down 9%. Meanwhile, gross domestic product in Singapore fell 3.4% in the second quarter versus -0.1% expected. Compared with a year earlier, GDP grew 0.1% in the second quarter — the slowest year-on-year growth since the second quarter of 2009. Nevertheless, Asian stocks rose on Friday though mainly posted losses on a weekly basis as economic concerns overweighed bullishness from expectations of monetary policy easing by major global central banks. The regional markets were under pressure in the first part of the week as strong US jobs data dented investor optimism over a rate cut by the Federal Reserve. However, the indices managed to trim losses on Thursday and Friday but failed to turn positive on the week.

US equities

U.S. equities closed at a record high for a second straight day on Friday, and recorded a second consecutive weekly advance, as investors remained cautiously optimistic about prospects for easier monetary policy, despite a bigger-than-expected rise in inflation. Earlier, the rally in U.S. stocks lost some steam after President Donald Trump tweeted a complaint that China is “letting us down” by not buying U.S. farm products. Health-care shares gained after the Trump administration pulled the plug on a proposed overhaul of drug rebates. The major indexes passed multiple resistance levels and posted solid gains last week week amid testimony from Powell signaling that a rate cut was coming. The Dow closed above 27,000 for the first time on Thursday. The index closed the week 1.5% higher. The S&P 500 rose 0.8% and the Nasdaq ended the week up 1%. According to the CME Group’s FedWatch tool, market expectations for lower rates in July currently stand at 100%. At that, traders are pricing in a 20% chance of the Fed cutting by 50 basis points. As a reminder, the Fed’s next meeting is scheduled for July 31.


At the start of the week, the dollar maintained the bullish bias as traders continued to digest strong employment data. But the selling pressure reemerged after Powell’s dovish comments, and the US currency finished the trading week on the defensive, and even strong inflation data failed to prevent the sell-off. It looks like that a July rate cut is now a foregone conclusion as Powell sounded far more dovish than expected and FOMC minutes suggested that many members of the committee were open to monetary policy softening. Meanwhile, U.S. underlying consumer prices increased by the most in nearly 1-1/2 years in June. The consumer price index excluding volatile components rose 0.3% last month. That as the largest increase since January 2018 and followed four straight monthly gains of 0.1%. But the greenback failed to recover on strong data as the report didn’t change expectations the Federal Reserve will cut interest rates this month. Against this backdrop, recovered from lows around 1.12 and finished the week at 1.1270. At the same time, the pair failed to challenge the 1.13 barrier and showed only a limited ascent as some weak economic updates and a dovish ECB meeting minutes shifted sentiment to the negative. On the data front, German exports and industrial production were up slightly in May, Euro zone investor morale by Sentix fell further in July, German wholesale prices dropped -0.5% versus 0.3% in the previous month, while euro area industrial production was up by 0.9% last month. Meanwhile, the ECB meeting minutes showed that the central bank is ready for additional policy easing. At that, easing expectations in Europe will likely continue to cap the upside in the EURUSD pair despite the dollar is under pressure from a dovish shift in the Federal Reserve’s monetary policy.


Oil prices moved up in the weekly charts, with Brent registered a late-May high at $67.63 though finished below the $67 barrier. The market rose due to a sharp decline in the US crude inventories and concerns over US Gulf of Mexico production ahead of Tropical Storm Barry, as well as tensions surrounding Iran after an attempt to block a British-owned tanker in the Strait of Hormuz. Brent got a good lift from inventory data. The EIA report revealed that crude inventories plunged by 9.5 million barrels for the week ending Jul 5, more than 4.5 times what energy analysts had expected. The past week’s decline in oil inventories was the fourth in a row. Gasoline supplies fell 1.5 million barrels, also for its fourth successive weekly decline. Meanwhile, Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil fell by 4 to 784 this week. That followed a decline of 5 oil rigs a week earlier. In its monthly report, OPEC kept its modest global oil demand growth forecast at 1.14 million bpd for 2020, suggesting that the world would need 29.27 million bpd of crude from its 14 members in 2020, down 1.34 million bpd this year. IEA also suggested an oversupply forecast for 2020, with a 2.1 million bpd expansion from non-OPEC supply led by US shale producers.