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Asia Roundup: Aussie eases as trade surplus narrows, yen gains amid persisting global trade tensions. Asian shares consolidate - Thursday, June 6th, 2019

Market Roundup

  • Trump says 'not enough' progress made in high-stakes U.S.-Mexico talks
     
  • Fed's testing of new ideas for policy framework already underway
     
  • IMF's Lagarde says tariff actions don't pose global recession threat
     
  • Pentagon eyes rare earth supplies in Africa in push away from China
     
  • U.S. pursues sale of over $2 bln in weapons to Taiwan, sources say, in test for China
     
  • U.S. House Democrat says support lacking for Trump impeachment inquiry
     
  • Danish centre-left opposition wins election on welfare pledges
     
  • In double whammy, Fitch downgrades Mexico and Moody's lowers outlook
     
  • Australia Apr Trade Balance G&S (A$), 4,871 mln, 5,100 mln f'cast, 4,949 mln prev, 4,887 mln rvsd
     
  • Japan w/e 1 Jun Foreign Bond Investment (JPY), 441.7 bln, -189.0 bln prev, 1169.5 bln rvsd
     

Economic Data Ahead

  • (0500 ET/0900 GMT) EZ Q1 GDP Revised YY, 1.2% f'cast, 1.2% prev
     
  • (0500 ET/0900 GMT) EZ Q1 GDP Revised QQ, 0.4% f'cast, 0.4% prev
     
  • (0500 ET/0900 GMT) EZ Q1 Employment Final YY, 1.3% f'cast, 1.3% prev
     
  • (0745 ET/1145 GMT) EZ Jun ECB Refinancing Rate, 0.0% f'cast, 0.0% prev
     
  • (0745 ET/1145 GMT) EZ Jun ECB Deposit Rate, -0.40% f'cast, -0.40% prev
     

Key Events Ahead

  • N/A Roundtable with Katharine Braddick, director general of financial services, UK Treasury in London.
     
  • (0425 ET/0825 GMT) BOJ's Haruhiko Kuroda and Japanese Finance Minister Taro Aso speak at IIF Spring Membership Meeting in Tokyo
     
  • (0500 ET/0900 GMT) BoE's Mark Carney gives keynote remarks at 2019 Institute of International Finance Spring Membership Meeting in London
     
  • (0745 ET/1145 GMT) ECB announces policy decision, followed by President Mario Draghi's news conference in Vilnius
     
  • (0840 ET/1240 GMT) Dallas Fed's Robert Kaplan participates in moderated Q&A session before 14th Annual Carroll School of Management Finance Conference in Chestnut Hill
     
  • (1300 ET/1700 GMT) New York Fed's John Williams speaks before C. Peter McColough Series on International Economics organized by Council on Foreign Relations in New York
     

FX Beat

DXY: The dollar index eased as worsening trade tensions between the United States and China, and looming U.S. tariffs on goods imported from Mexico supported expectations the Federal Reserve would cut interest rates this year. The greenback against a basket of currencies traded 0.05 percent down at 97.28, having touched a low of 96.75 on Wednesday, its lowest since Mar. 27. FxWirePro's Hourly Dollar Strength Index stood at -104.24 (Highly Bearish) by 0500 GMT.

EUR/USD: The euro steadied after falling from a 7-week peak in the previous session after Italian Prime Minister Giuseppe Conte's office stated that the government wanted constructive talks with Brussels to reach a deal over 2019 budget targets. Investors now await the European Central Bank's monetary policy decision later in the day, where it is expected to maintain guidance about the possibility of more stimulus. The European currency traded 0.1 percent up at 1.1232, having touched a high of 1.1306 on Wednesday, its highest since Apr. 17. FxWirePro's Hourly Euro Strength Index stood at 47.80 (Neutral) by 0500 GMT. Investors’ attention will remain on Eurozone gross domestic product, employment change, and ECB policy decision, ahead of the U.S. trade balance, unemployment benefit claims, nonfarm productivity, and speeches from Fed officials. Immediate resistance is located at 1.1304 (Apr. 18 High), a break above targets 1.1344 (March 15 High). On the downside, support is seen at 1.1201 (May 14 Low), a break below could drag it below 1.1183 (April 2 Low).

USD/JPY: The dollar eased, reversing most of its previous session gains, as concerns over U.S.-Mexico talks on tariffs and immigration, and heightened U.S.-China trade tensions fuelled broader concerns about global trade hostilities. The major was trading 0.2 percent down at 108.21, having hit a low of 107.81 on Wednesday, its lowest since Jan. 10. FxWirePro's Hourly Yen Strength Index stood at -46.16 (Neutral) by 0500 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. trade balance, unemployment benefit claims, nonfarm productivity, and speeches from Fed officials. Immediate resistance is located at 108.62 (38.2% retracement of 109.92 and 107.81), a break above targets 109.11 (61.8% retracement). On the downside, support is seen at 107.77 (Jan. 10 Low), a break below could take it lower at 107.51 (Jan. 4 Low).

GBP/USD: Sterling consolidated within narrow ranges, amid growing fears that Britain could leave the European Union without a deal. The major traded 0.05 percent up at 1.2688, having hit a high of 1.2743 on Wednesday; it’s highest since May 27. FxWirePro's Hourly Sterling Strength Index stood at 46.63 (Neutral) 0400 GMT. Investors’ attention will remain on BoE Carney’s speech, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2747 (May 27 High), a break above could take it near 1.2798 (May 17 High). On the downside, support is seen at 1.2647 (May 24 Low), a break below targets 1.2580 (May 30 Low). Against the euro, the pound was trading 0.1 percent down at 88.52 pence, having hit a low of 89.02 on Tuesday, it’s lowest since Jan. 15.

AUD/USD: The Australian dollar eased after data showed domestic trade surplus came in at A$4871 million in April, below the forecast of A$5100 million and a previous reading A$4949 million in March. The Aussie trades 0.05 percent down at 0.6965, having hit a high of 0.7007 on Wednesday, it’s highest since May 10. FxWirePro's Hourly Aussie Strength Index stood at -36.57 (Neutral) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6935 (May 14 Low), a break below targets 0.6881 (May 24 Low). On the upside, resistance is located at 0.7029 (May 2 High), a break above could take it near 0.7061 (May 1 High).

NZD/USD: The New Zealand dollar rose, hovering towards a 5-month peak hit in the previous session, as the greenback eased on worries over Washington's trade conflict with its partners. The Kiwi trades 0.2 percent higher at 0.6628, having touched a high of 0.6667 on Wednesday, its highest level May 1. FxWirePro's Hourly Kiwi Strength Index was at 39.90 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6653 (May 3 High), a break above could take it near 0.6685 (Apr. 30 High). On the downside, support is seen at 0.6550 (May 15 Low), a break below could drag it below 0.6474 (Oct. 4 Low).

Equities Recap

Asian shares consolidated within narrow ranges, amid fears the U.S. trade dispute with Mexico would further depress global growth.

MSCI's broadest index of Asia-Pacific shares outside Japan traded flat.

Tokyo's Nikkei rallied 0.05 percent to 20,774.04 points, Australia's S&P/ASX 200 index surged 0.4 percent to 6,383.00 points.

Shanghai composite index eased 1.2 percent to 2,826.71 points, while CSI 300 index traded 0.9 percent down at 3,563.11 points.

Hong Kong’s Hang Seng traded 0.1 percent lower at 26,863.04 points. Taiwan shares shed 0.5 percent to 10,409.20 points

Commodities Recap

Crude oil prices steadied after falling to near 5-month lows in the previous session; however, sentiment remained weak as markets are under pressure from rising U.S. supply and a stalling economy. International benchmark Brent crude was trading 0.5 percent higher at $60.82 per barrel by 0458 GMT, having hit a low of $59.42 on Wednesday, its lowest since Jan. 28. U.S. West Texas Intermediate was trading 0.2 percent up at $51.80 a barrel, after falling as low as $50.59 on Wednesday, its lowest since the Feb. 12.

Gold prices surged after rallying to their highest in 15-weeks as persisting fears about global trade and expectations of a U.S. interest rate cut boosted demand for safe-haven assets. Spot gold was 0.1 percent up at $1,330.95 per ounce by 0512 GMT, having touched a high of $1,344.01 on Wednesday, its highest since Feb. 20. U.S. gold futures settled up 0.4 percent at $1,333.60 an ounce.

Treasuries Recap

The Japanese government bond prices dipped, with the five-year JGB yield rising 1.5 basis points to minus 0.235 percent. The benchmark 10-year yield climbed 1 basis point to minus 0.110 percent and the 30-year yield nudged up to 0.425 percent.

The Canadian government bond prices were higher across the yield curve, with the two-year up 10 Canadian cents to yield 1.338 percent and the 10-year rising 32 Canadian cents to yield 1.44 percent. The 10-year yield touched its lowest intraday since June 2017 at 1.410 percent.

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