Market Overview
The market has taken a view on the dollar, and it does not look pretty for the greenback. It seems that every shift in newsflow is being interpreted as dollar weakening right now. The impact of the tit-for-tat deterioration in US and China diplomatic relations along with increasingly worrying reintroduction of containment measures across several key US states. However, it is the perception of the US economic recovery lagging in the second half of the year which seems to be the major factor in driving the dollar lower. This was hinted in the flash PMI data from Friday, and economic data for July could paint a worrying picture for the US. If so, this could usher the Fed towards further easing measures such as yield curve control, whilst there is also a difficult political backdrop of disagreement in Congress over additional fiscal stimulus. However, it could be that if Congress can come together with a support package of measures, then this could change the course of the dollar this week (at least near term anyway). Treasury yields are edging lower as the dollar weakens. The dollar has lost its safe haven appeal. For now, we see ever higher, Cable breaking out, Dollar/Yen breaking down, but the most eye opening moves are coming in the commodities complex. Gold has finally hit an all-time high in a move above $1920 this morning, whilst in just one week, silver has rallied a whopping +25%. The contrarians will clearly be looking for their opportunities, but for now, the dollar weakness is continuing.