Aussie dollar rally dies out as euro tumbles

DXY was back last night as the EUR fell:

The AUD was weak:

The oil has faded. Gold signals no turn in DXY, although shitcoin may be:

Metals try:

But not minors:

Emerging market stocks rose:

Even EM waste took a break:

The American curve has been demolished. This is not consistent with any rally:

But the bear pressure continues:

Westpac has packaging:

Event envelope

Sales of existing homes in the United States in June fell 5.4% (est. -1.1%, before -3.4%). The housing sector in 2022 has been affected by soaring mortgage rates and heightened uncertainty.

German PPI inflation in June was up 0.6% m/m and 32.7% y/y (est. +1.5% and 33.7%, before 1.6% and 33.6%). While price increases for basic and energy goods have moderated somewhat, inflation for capital goods and durable goods has accelerated.

Eurozone consumer confidence fell to -27.0 (est. -24.9, before -23.8).

UK CPI inflation in June rose by 0.8% m/m and 9.4% y/y (est. +0.7% and 9.3%, before 0.7% and 9.1%). The RPI also rose, to 11.8% year-on-year – a reading that will be the main concern of unions in wage negotiations.

Italian Prime Minister Draghi looked set to lose power after three key parties failed to back him in a confidence vote. Draghi’s resignation would plunge the country into months of political turmoil just as the economic warning signs are beginning to flash.

Russian President Putin signaled that Europe would start receiving gas again through a key pipeline, but warned that unless a row over sanctioned parties is resolved, flows will be tightly restricted.

Event Insights

New Zealand : A trade balance deficit expected to print in June given the seasonal slowdown in agricultural exports and high oil prices (Westpac f/c: -$100m).

Japan: The Bank of Japan will likely maintain a policy rate of -0.10% and a 10-year yield target of 0.00%.

USD: At the political meeting in July, the ECB is expected to begin its rate-tightening cycle with a 25 basis point hike in all policy rates, with the main refinancing rate rising from 0.00% to 0.25%.

WE: The month of July Philly Fed Index should continue to signal weak trading conditions in the region (market f/c: 1.5). Meanwhile, Initial jobless claims should remain close to all-time lows (market f/c: 240k) and the month of June leading index should indicate a deterioration in growth prospects (market f/c: -0.6%).

Everything revolves around Europe for now. Perversely, markets are excited about the prospect of accelerated ECB tightening as it will help reduce pressure on DXY.

But what about growth? The European economy is on the brink of a wartime recession just as the ECB begins a tightening cycle. Is this really positive for the EUR? !

Moreover, Italy is collapsing again:

Italian Prime Minister Mario Draghi said his government’s survival depended on ‘rebuilding the confidence pact’ as he weighed an outpouring of support for him to remain in office ahead of a confidence vote scheduled for Wednesday night .

And the gas flows from NordStream1 are still uncertain:

I don’t see why anyone would want to own EUR right now, nor therefore AUD.

But that’s what markets do. While the feeling is stretched, they bank on the hope that the worst is over. Eventually, one of these bets will be correct.

Not yet !

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