Stocks Quiet as Investors Assess Tax Bill – Nasdaq up 0.3%
US stock markets experienced another quieter day yesterday as investors continued to assess the government’s tax bill, which passed in the House of Representatives by just one vote. The Dow closed flat on the day, the S&P edged just 0.04% lower, and the Nasdaq gained 0.28%. Treasury yields closed lower, the 2-year down 2.8 basis points to 3.991% and the 10-year down 7 basis points to 4.529%, whilst the dollar pulled back some of its recent losses, the DXY up 0.3% to 99.94. Oil prices dropped on a report that OPEC+ will look at further production increases in July, Brent down 1.40% to $64.00 and WTI off 0.60% to $61.20. Gold drifted lower over the course of the day, closing down 0.66% at $3,294.09.
FX Majors to Break Out of Ranges
Most of the major FX pairs have been stuck in relatively tight ranges for the last week or so; however, traders are not expecting them to last too long. With the exception of the USDJPY, the major currencies have been trading with much less volatility than we have seen over the course of the year, albeit near the lows in USD terms. The market is now waiting for the next catalyst to move them either into fresh ranges and to continue the recent dollar weakness trend, or to pull back into dollar strength. The likelihood is that updates on trade, which have been dominating FX moves in the last few months, will be the catalyst for those moves, with good news and reduced tariffs likely to result in dollar strength, and further tariff implementation and global trade disruption likely to see the dollar enter fresh downside regions.
Retail Sales Data in Focus Today
Retail Sales numbers are in focus for investors today, and they will be getting close attention from analysts looking to see if tariffs across the globe have started to affect consumer sentiment. New Zealand Retail Sales data has already been released early in the Asian session, coming in well below expectations, printing 0.0% against an expected 0.9% q/q, but there has so far been little reaction in the Kiwi dollar. The focus will again be on the pound early in the European session with UK Retail Sales numbers due out; expectation is for a 0.3% month-on-month increase. The New York session will see the initial focus north of the border for Canadian Retail Sales data; the headline number is expected to show a m/m 0.2% increase, but the Core data a 0.3% decrease, and traders are anticipating good moves in the Loonie around the release. US New Home Sales are out later in the session, but once again, investors are expecting the newswires to provide more volatility.
