News that the US and China agreed to drop their tariff threats while they work on a larger trade agreement rallied equity markets last night.
The NIKKEI was up 0.3%, the SCI gained 0.6%, Eurozone shares were unch to +0.7%, and S&P futures were +0.6%, with firmer oil aiding the move (WTI from $71.38 - $71.85 supply concerns from Iran and Venezuela).
The dollar rose sharply, with the DX climbing to yet another 5-month high at 94.06. Weakness in the safe haven yen (110.80 – 111.39 – 4-month low), a plunge in the euro ($1.1765 - $1.1716 – 6-month low, continuing concerns over Italian political situation), and a dip in the pound ($1.3480 - $1.3390, 5-month low, concerns over tomorrow’s inflation reading,
Carney’s speech, and lack of optimism ahead of the next round of Brexit negotiations), helped lift the greenback. Gold came off sharply, falling from its $1292.15 high through support at $1285-87 ($1287 – double bottom - 12/28 and 5/16 lows, $1286 – 5/18 1ow, $1285 – 5/17 low, $1285 - up trendline from 12/15/16 $1123 low), to reach $1282 – where support in front of the $1281 (12/27 low) held. Later during European hours, the DX pulled back to 93.78, and gold bounced back to the old support at $1285.
After the NY open, the DX continued to pare more of its overnight gains – despite a stronger than expected reading on the Chicago Fed National Activity Index (0.34 vs. exp. 0.14).
A strong bounce in the euro ($1.1770) knocked the DX back to 93.65, and tripped some bargain hunting buying and short covering in gold. The yellow metal punched back through $1285 to reach $1289.50 by mid-morning.
During the late morning, US equities cut some of their gains (S&P...