Market Roundup
- CFTC IMM CTA data - Specs up bullish USD nets to 6.62 bln ahead of Brexit Vote, net GBP shorts up, net JPY longs off.
- Japan PM Abe – Instructed FinMin Aso to take necessary FX steps, paying even more close attention than heretofore on FX moves, G7 to continue to send messages to stabilize markets, plenty uncertainty-risks, BoJ to sustain market liquidity, financial intermediation - Reuters.
- BoJ DepGov Nakaso – No problems so far in market liquidity, foreign-currency funding by Japanese firms, continuing to monitor situation – Reuters.
- MoF Asakawa – Market trying to find new equilibria – Reuters.
- Ex-BoJ Momma – BoJ can stand pat if Brexit turmoil proves temporary.
- Japan LDP Inada – Bold new steps to stem JPY rise needed – NHK, Nikkei.
- China Prem Li – No China hard landing, will reach growth targets, no basis for long-term yuan depreciation – Reuters.
- PBOC fixes yuan at 6.6375 vs USD, lowest since Dec ’10, hits 6.64.
- IMF Lagarde – Market vastly underestimated Brexit vote but no panic –Reuters.
- BIS – Urgent need for global policy action, cites “risky trinity”, central banks to smooth Brexit-related turmoil – Reuters.
- Germany CDU Krichbaum – Scotland welcome to join EU – Welt am Sonntag.
- New Zealand May trade surplus NZ$358 mln, yr-to-May def NZ$3.633 bln, NZ$164/3.85 mln/ bln eyed, imports NZ$4.22 bln, exports NZ$4.57 bln, NZ$4.15/NZ$4.40 bln eyed.
- New Zealand Q2 Westpac/MM employee confidence index dips to 101.5, Q1 104.8.
Economic Data Ahead
- (0400 ET/0800 GMT) Eurozone May money supply M3, +4.8% AR eyed; last 4.6%.
- (0400 ET/0800 GMT) Eurozone May loans to non-financials, +1.2% y/y; last +1.2%, households +1.5%.
- (0830 ET/1230 GMT) United States May good trade balance – advance; last $57.53 bln deficit.
- (0945 ET/1345 GMT) United States Jun Markit PMI composite – flash, 50.9 eyed; last 50.9.
- (0945 ET/1345 GMT) United States Jun Markit PMI services – flash; last 51.3.
- (1030 ET/1430 GMT) United States Jun Dallas Fed mfg business index; last -20.8.
Key Events Ahead
- N/A ECB Central Bank Forum in Sintra, Portugal (till June 29).
- N/A Norway NOK3 bln 12-month NST35 treasury bill auction.
- (0500 ET/0900 GMT) Italy, E500-750 mln 1.25% 2032 index-linked BTP auction.
- (0530 ET/0930 GMT) Germany E1.5 bln 12-month Bubill auction.
- (0800 ET/1200 GMT) Bloomberg live event in Washington, DC, various attendees.
- (0830 ET/1230 GMT) Bretton Woods Committee meeting in Washington, DC.
- (0855 ET/1255 GMT) France E2.9-3.3/1.1-1.5/0.9-1.3 bln 3/6/12-month BTF note auctions.
FX Beat
USD: The dollar index, against a basket of currencies rose to 96.40, hovering towards a high of 96.70, struck in the previous session.
EUR/USD: The euro came under immense pressure as Brexit clouded the future of the European Union. The impact of Brexit spurred global equity turbulence, while safe-havens rose due to negative effect on the European economic and political uncertainty. The major trades 0.7 percent lower at 1.1005, attempting to sustain the 1.1000 level. On Friday, it fell as low as 1.0911 from a high of 1.4217. The political news flow from Europe is likely to drive the pair, as markets try to recover from Brexit effect. Investors will closely eye European Central Bank Forum due to begin later in the day. Immediate support is located at 1.0984 (Session Low), break below targets 1.0945/ 1.0911. On the upside, resistance is seen at 1.1074 (Session High).
USD/JPY: The Japanese yen gained as markets still absorb Friday's Brexit shock. Japanese Prime Minister Shinzo Abe stated that he has instructed Finance Minister Taro Aso to monitor FX markets closely and take necessary steps, after Britain voted to leave the European Union. The greenback was trading 0.6 percent lower at 101.58, having touched a low of 98.82 on Friday, its lowest since November 2013. Markets are likely to track broader market sentiment, ahead of U.S. goods trade balance and flash services PMI data release. Immediate support is located at 101 level, while resistance is located at 102.47 (Session High), break above targets 103 level.
GBP/USD: Sterling declined more than 2 percent, sliding back toward a 31-year low, as investors remain bearish after Britain voted to exit the European Union triggered global markets turmoil. British pound was down 2.0 percent at 1.3392, within the sight of 1.3226 touched on Friday, it’s lowest since 1985. It slumped as much as 11 percent on Friday as investors reversed their positions on Britain remaining in the EU. News surrounding Brexit will keep dominating the fundamental as European leaders will meet in Brussels in a summit this week. Immediate support is located at 1.3226 (Previous Session Low), while on the upside, resistance is seen at 1.3483 (Session High). Against the euro, the pound was trading lower at 82.27 pence.
AUD/USD: The Australian dollar weakened after the Chinese central bank devalued yuan, triggering risk-aversion across the financial markets. The PBoC set the yuan's midpoint rate at 6.6375 per dollar, 0.9 percent weaker than the previous fix 6.5776. The Aussie hovers above 0.7400 level, having touched session low of 0.7385. On Friday, it declined as low as 0.7303 after Britain surprised global markets by voting to leave the European Union. With Australian economic calendar remains absolutely data empty, markets now await U.S. goods trade balance and flash services PMI data for further cues. Immediate support is located at 0.7385 (Session Low), break below could drag the pair to 0.7359. On the upside, resistance is located at 0.7450, break above targets 0.7481 /0.7500.
NZD/USD: The New Zealand dollar declined below 0.7100 level following Chinese yuan devaluation. However, the major was supported by better-than-expected trade surplus. New Zealand May trade surplus came in at $358 mln, versus previous $326 mln, while exports and import stood at $4.57 bln and $4.22 bln, respectively. The kiwi trades 0.8 percent lower at 0.7061, having touched a low of 0.7044 earlier in the session. Immediate support is located at 0.7032 (June -17 Low), while resistance is seen at 0.7114 (session High).
Equities Recap
Asian shares struggled to regain momentum after Britain's decision to leave the European Union, triggered financial market turmoil.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.9 percent in volatile trade.
Tokyo's Nikkei gained 2.39 pct at 15,309.21, Australia's S&P/ASX 200 index rose 0.45 pct at 5,136.00 points and Seoul shares edged down 0.07 pct.
Shanghai composite index gained 1.2 pct at 2,889.04 points, while CSI300 index also gained 1.2 pct at 3,116.06 points.
Hong Kong’s Hang Seng was trading 0.3 pct lower at 20,194.98 points. Taiwan stocks dropped 0.2 pct at 8,458.87 points.
Commodities Recap
Oil prices declined, extending losses after Britain's vote to leave the European Union triggered a massive sell-off in global markets. Brent crude oil was down 0.3 percent at $48.24 a barrel by 0401 GMT, after settling down at $47.52 on Friday. U.S. crude was down 25 cents at $47.39 a barrel, after closing down $2.47, or 4.9 percent, on Friday.
Gold advanced, nearing a more than 2-year high touched on Friday, as investors rushed towards the safe-haven amid economic and political uncertainty after Britain voted to exit the European Union. Spot gold rose as high as $1,335.33 an ounce and was trading 0.7 percent up at $1,324.23 by 0406 GMT. U.S. gold for August delivery was up 0.6 percent at $1,330.80 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 1.0190 percent down by 0.075 bps, while 5-year was 0.072 bps down at 1.0222.
The Australian government bonds slumped as investors cashed in profit after sovereign bonds climbed to its record levels after the United Kingdom voted to end 43 years of European Union membership. The yield on the benchmark 10-year Treasury note rose more than 7 basis points to 2.050 percent and the yield on short-term 2-year note jumped nearly 5-1/2 basis points to 1.589 percent.
The New Zealand government bonds market traded modestly firmer amid global uncertainty over the UK vote to leave the EU. The yield on benchmark 10-year bond fell 1-1/2 basis point to 2.375 percent, yield on 7-year note also dipped 1-1/2 basis point to 2.075 percent and the yield on short-term 2-year note tumbled 1 basis point to 2.015 percent.
The Canadian 2-year price rose 9 Canadian cents to yield 0.548 percent and the benchmark 10-year climbed 50 Canadian cents to yield 1.179 percent. The Canada-U.S. 10-year spread shifted 11.4 basis points to -39.3 basis points, its smallest gap since May 5, as Treasuries outperformed.
