FOREX: USDCAD Completes Round Trip Following Stellar Employment Report
Jul-11 16:15
- The USD index is rising once again on Friday, extending its cautious recovery from last week’s cycle lows to ~1.5%. Although off its best levels, the DXY is threatening a close above 20-day EMA resistance which would mark a bullish development.
- The Canadian dollar has been a focus in G10 today following President Trump’s latest letter to Prime Minister Mark Carney and the announcement that Canada will face a 35% tariff on exports to the United States starting August 1. This prompted a rapid spike for USDCAD during APAC hours, from levels around 1.3655 to an intra-day peak of 1.3731.
- However, a reversal lower was then accelerated following a positive set of June employment data in Canada. Despite the composition of job gains being heavily tilted towards part-time, the lower-than-expected unemployment rate (6.9% vs 7.1% expected) has seen a notable repricing of July easing expectations, which worked in favour of the Canadian dollar.
- As such, USDCAD eroded the entirety of the Trump letter rally from overnight to print a fresh session low by 1 pip at 1.3652. On the downside, sights remain on key support at 1.3540, the Jun 16 low. Clearance of this level would resume the technical downtrend.
- GBP remains weaker following this morning's second consecutive month of negative growth in May, with fiscal concerns also remaining a headwind for the pound. For GBPUSD, spot broke to fresh weekly lows below the 1.35 handle, to then test key 50-day EMA support which intersects today at 1.3481. Below here, a key trendline drawn from the January lows comes in just above the 1.34 mark.
- Higher core yields today also worked in favour of USDJPY (+0.75%), which extends the week’s advance to 2% as we approach the close. The latest bullish wave has seen the pair narrow the gap to 148.03, the Jun 23 high.
- Chinese trade and activity data are early data highlights next week, while US CPI dominates the global calendar.
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US TSYS/SUPPLY: Preview 10Y Note Auction Re-Open
Jun-11 16:14
- Treasury futures are holding near this morning's post-CPI data highs (TYU5 +11.5 at 110-18) ahead of the $39B 10Y Note auction re-open (91282CNC1) at the top of the hour, WI currently 4.430%, 8.8bp cheap to last month's stop.
- May auction recap: Treasury futures gained (TYM5 +6 at 111-08, 4.3257% yld) after the $42B 10Y note auction (91282CNC1) stopped 1.3bp through: drawing 4.342% high yield vs. 4.355% WI; 2.60x bid-to-cover vs. 2.67x prior.
- Peripheral stats: indirect take-up retreats to 71.19% vs. 87.90% prior; direct bidder take-up rises from last month's record low of 1.4% to 19.88%; primary dealer take-up 8.93% vs. 10.7% prior.
- The next 10Y auction (re-open) is tentatively scheduled for July 9.
SECURITY: Pentagon Launches Review Into Scrapping AUKUS Submarine Deal
Jun-11 16:09
The Financial Times reporting that the US Department of Defense, led by Under Secretary of Defence for Policy Elbridge Colby, "has launched a review of the 2021 Aukus submarine deal with the UK and Australia to determine if the US should scrap the project."
- FT notes: "Ending the submarine and advanced technology development pact would destroy a crucial pillar of security co-operation between the allies, at a time of heightened tension with China. The review has triggered anxiety in London and Canberra."
- Colby told the Sydney Morning Herald in August last year: “Even in the last couple of months, I would say that my views on AUKUS have become a bit more receptive. I would describe myself as maybe an AUKUS agnostic. I’m not an atheist, which is to say I’m prepared to be convinced in the existence of the pot of gold at the end of the rainbow, but I have not seen the weight of compelling evidence thus far.”
- Breaking Defence reported yesterday that the UK government announced on Tuesday, "a more than $8 billion investment for two major production sites set to build and deliver “up to” 12 nuclear-powered attack submarines (SSNs) under the trilateral AUKUS program."
- The Guardian notes that UK Prime Minister Keir Starmer said, following the release of a Strategic Defence Review last week, that the Aukus submarines are critical for the UK’s defence, and declaring "a landmark shift in Britain’s deterrence and defence..."
PIPELINE: Corporate Bond Update: $4.2B Brown & Brown 6pt Launched
Jun-11 15:58
- Date $MM Issuer (Priced *, Launch #)
- 06/11 $4.2B #Brown & Brown 6pt: $400M 1.5Y +65, $500M 3Y +80, $800M 5Y +92, $500M 7Y +107, $1B 10Y +117, $1B 30Y +135
- 06/11 $Benchmark Citadel Securities 5Y +180a, 10Y +200a
- 06/11 $Benchmark Export Development Canada (EDC) 5Y SOFR+45a
- 06/11 $700M Unisys 5.5NC2.5
