Market Roundup
- George Soros – GBP fall post-Brexit to be bigger, more disruptive than “Black Wednesday” – Guardian.
- Japan FinMin Aso – Rapid FX moves undesirable, stability important, won’t intervene in FX so easily, no comment on response to possible Brexit.
- BoJ Policy Board April 27-28 meeting minutes sticks to recent script, aware of higher risks but maintains optimism, risks skewed to downside but “virtuous economic cycle” intact – Reuters.
- Foreigners’ stake in Japan Inc falls back below 30% - Nikkei.
- IMF DepMD Lipton – Japan must take Abenomics even further – Nikkei.
- Japan June Reuters Tankan mfg index +3, non-mfg +17, May +2, +19, indices eyed at +4, +20 in Sept, non-mfg index lowest since April ’13, Brexit fears.
- ICBC markets 3-year JPY pro-bond via Mizuho, SMBC – IFR.
- RBA June 7 meeting minutes – Steady stance consistent with sustainable economic growth, low rates-weaker AUD growth supportive, Q2 more moderate.
- RBA - Australia bond markets still liquid despite tighter rules - Reuters.
- Australia Q1 house price index -0.2% q/q, led by Sydney, Melbourne up.
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain May PSNB, GBP9.35 bln; last GBP6.58 bln, PSNCR -GBP2.39 bln.
- (0430 ET/0830 GMT) Great Britain May – ex-banks, GBP9.35 bln; last GBP7.19 bln.
- (0500 ET/0900 GMT) Germany Jun ZEW economic sentiment index, 4.7 eyed; last 6.4.
- (0500 ET/0900 GMT) Germany Jun ZEW current conditions index, 53.0 eyed; last 55.5.
- (0600 ET/1000 GMT) Great Britain CBI industrial survey – order books index, -7 eyed; last -8.
Key Events Ahead
- N/A Germany constitutional court to rule on curbs on ECB powers.
- N/A Ireland FinMin Noonan annual summer economic statement
. - (0440 ET/0840 GMT) Spain E3-4 bln 3 and 9-month treasury bill auctions.
- (0530 ET/0930 GMT) ECB zero%v 7-day refi, E49 bln allotment eyed, E49.14 bln maturing.
- (0630 ET/1030 GMT) ESM E1.5 bln 6-month bill auction.
- (0830 ET/1230 GMT) United States TsySec Lew speaks at Washington, DC SelectUSA conference.
- N/A ECB Pres Draghi Brussels parliamentary testimony.
- (1000 ET/1400 GMT) FOMC Chair Yellen semi-annual Humphrey-Hawkins Senate testimony.
- (1145 ET/1545 GMT) UK DMO Stheeman in panel discussion at London Euromoney conference.
- (1430 ET/1830 GMT) Fed Gov Powell speaks at New York roundtable.
- (1630 ET/2030 GMT) FOMC Chair Yellen, US TsySec Lew at FSOC meeting in Washington, DC.
FX Beat
USD: The dollar index, against a basket of currencies stood at 93.57, holding above a 1-month low of 93.425 hit earlier this month, as markets await U.S. Federal Reserve Chair Janet Yellen's testimony before the Senate Banking Committee.
EUR/USD: The euro bounced back after declining from a high of 1.1382 touched on Monday. However, a broad based US dollar recovery capped the major's gains. The pair trades 0.1 percent higher at 1.1330, having touched an early high of 1.1343. The major was weighed down following a mixed Brexit polls' results, two out of three Brexit polls released late-Monday showed the 'Remain' camp in lead, while a third poll showed votes favoring the 'Leave' camp. Markets now await Eurozones ZEW economic sentiment survey and ECB President Draghi's speech ahead of Fed Yellen’s two-day testimony before Congress, which will provide fresh insights on the US interest rates outlook. Immediate resistance is located at 1.1343 (Session High), break above will take it to 1.1380. On the downside, support is seen at 1.1302, break below targets 1.1284.
USD/JPY: The Japanese yen edged down against the dollar, after rising close to its 22-month high of 103.55 set last Thursday. The greenback trades 0.4 percent higher at 104.45, attempting to sustain gains above the 104.00 level. Bank of Japan's April monetary policy board meeting minutes released earlier focused much of Kuroda's recent comments that Japan is on course towards its inflation target and that the economy is continuing to recover gradually. Markets await the EU referendum where a Brexit could trigger uncertainty in financial markets. Immediate resistance is located at 104.84 (Previous Session High), break above targets 105 level. On the lower side, support is seen at 103.58 (Session Low), break below could drag the pair lower 103.55 (22-month Low).
GBP/USD: Sterling rose against the dollar a day after posting its biggest daily gain in 7 years, supported by opinion polls that shifted in favor for Britain to remain in the European Union. Two out of three Brexit polls released late-Monday showed votes favoring the 'Remain' camp, while a third poll showed the 'Leave' camp in lead. According to Betfair, the implied probability of a "Remain" vote in Thursday's referendum rose to around 78 percent after declining as low as 60 percent last Thursday. Sterling gained 0.1 percent to 1.4702, having touched a high of 1.4725 earlier in the session. Immediate support is seen at 1.4604 (May-27 Low), break below will take the pair lower 1.4600 level. On the higher side, support is located at 1.4739 (May-26 High). Against the euro, the pound trades 0.5 percent lower at 77.23 pence.
AUD/USD: The Australian dollar advanced following the Reserve Bank of Australia's June 7 meeting minutes. The RBA minutes provided the same message the bank delivered in its post-meeting statement, implying just a slight easing bias. However, the major's gains were limited as Australia’s house price index for the first quarter came in weaker at -0.2 percent versus consensus 0.8 percent gain and previous 0.2 percent. The Aussie trades 0.2 percent higher at 0.7473, after rising to an early 1-week high of 0.7486. Markets will closely watch Fed Chair Yellen’s testimony and Australia's Westpac Leading index for further momentum. Immediate resistance is located at 0.7486 (Session High), break above will take the pair over 0.7500 level. On the lower side, support is seen at 0.7420 (Jun-9 Low).
NZD/USD: The New Zealand dollar declined on renewed selling pressure, sending the major towards 0.7100 level. The Kiwi halted its four day rally to trade 0.1 percent lower at 0.7110, pulling away from a high of 0.7130 struck in the previous session. Markets focus remains on Fed Yellen’s testimony, while the Brexit news flow will continue to acquire a lot of attention across the fx board. Immediate support is located at 0.7071 (5-DMA), break below targets 0.7032. On the upside, resistance is located at 0.7147 (Jun-9 High).
Equities Recap
Asian shares extended gains amid growing expectations that British voters will vote to remain in the European Union in this week's referendum.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 percent.
Tokyo's Nikkei gained 1.28 pct at 16,169.11, Australia's S&P/ASX 200 index rose 0.43 pct at 5,279.30 points and South Korean Seoul shares edged up 0.11 pct.
Shanghai composite index was flat at 2,887.39 points, while CSI300 index nudged up 0.1 pct at 3,116.23 points.
Hong Kong’s Hang Seng was trading 0.7 percent higher at 20,669 points. Taiwan shares added 0.7 pct at 8,684.85 points.
Commodities Recap
Oil prices were nearly flat after rallying as high as $50.65 a barrel on the back of easing concerns that Britain would vote to leave the European Union at a referendum this week. Brent crude futures' August front-month contract was down 25 cents at $50.40 a barrel. U.S. crude's expiring July front-month contract was down 17 cents at $49.20 a barrel at 0242 GMT. The more actively traded August contract, the new front-month from Wednesday, was down 16 cents at $49.80.
Gold edged down as opinion polls show that Britain could be more likely to vote to remain in the European Union in a referendum later this week. Spot gold declined 0.2 percent to $1,286.0 an ounce by 0425 GMT after touching a low of $1,277.86 on Monday.
Treasuries Recap
The 10-year U.S. treasury yield stood at 1.6662 percent down by 0.004 bps, while 5-year was 0.002 bps down at 1.1628 percent.
The Australian government bonds plunged as the latest polls by various corporate bodies in the United Kingdom on the June 23 Brexit referendum have reversed, with the percentage of citizens in favour of staying in the European Union outnumbering those who opposed it. The yield on the benchmark 10-year Treasury note, which moves inversely to its price rose 2-1/2 basis points to 2.170 percent and the yield on short-term 2-year note jumped 3-1/2 basis points to 1.681 percent.
The New Zealand government bonds closed modestly lower as Brexit fears started to fade, boosting investor appetite for risk. The yield on benchmark 10-year bond, which moves inversely to its price rose 1/2 basis point to 2.555 percent.
Canadian government bond prices were lower across a steeper maturity curve, the 2-year price fell 11 Canadian cents to yield 0.578 percent and the benchmark 10-year dropped 82 Canadian cents to yield 1.206 percent. The 10-year yield touched its highest since June 8 at 1.212 percent.
