SOFR, Wait and See!
The narrative centres around Biden’s push to preserve the viability of his embattled candidacy- last word yet to be said though - even as outspoken Democrats are still broadly supportive of Biden, their patience is certainly beginning to wear.
In money markets SOFR spiked to highest in its history, implying that Cash is getting scarce, reminiscent of what happened in Sept 2019 - possibly this time market is starting to see the strains of excessive government debt & Treasury bill issuance - simply put, financial system can't digest this level of debt without Fed liquidity- hence volatility in funding markets here to stay.
ISM services into contraction for second time in three months, though details are consistent with a moderating rather than contracting sector. In support of the strong undercurrent in demand, trade balance continued to worsen in May, to a deficit of $75.1 billion which is $0.6 billion deeper than April and sizable $6.9 billion deeper than Q1 average.
Nothing new in FOMC minutes- they see Economy appearing to be slowing & "price pressures were diminishing," - would have a wait-and-see approach.
Hung French Parliament is currently priced - Except for French bond spreads, EZ rates markets are returning to normality from before the start of French election turmoil.
Today : German factory orders & minutes of the ECB May meeting- Close above the 1.0746 21 dma is bullish signal - however would stand aside ahead of July 7
Survation's central scenario indicates that Labour is projected to win 484, surpassing the 418 seats won by Tony Blair in 1997.
Labour majority is very much factored -
How far UK swings towards Far Right will be the key takeaway for the markets from this election. GBPUSD should stay confined to 1.2703-1.2776.
TOPIX index hit 2,890.52, breaking a high of 2,885.50 set in Dec 1989 - it took almost 35 years to recapture the previous high - this generation thinks the equity markets would make historic highs on every day.
Just for context, low in USD/JPY on June 4 was 154.55 and the pair has been rising 16 out of 22 trading days since then. Time to consolidate - 161-162. that low liquidity in markets today would entice BOJ to intervene.