Market Roundup
- George Soros returns to trading, recently directed series of big, bearish Investments – Wall St Journal.
- BoJ DepGov Nakaso – Downside risks from overseas economies strong but optimistic on growth, BoJ committed to 2% inflation target by FY ‘17/18, will do what it takes, April stand-pat doesn’t rule out more ease – Reuters.
- Japan April core machinery orders -11.0% m/m, -8.2% y/y, -3.8%, -2.3% eyed.
- MoF flow data week-ended June 4 – Japanese buy net Y35.2 bln foreign stocks, Y893.9 bln bonds, sell Y56.1 bln bills; foreign investors sell net Y97.8 bln Japanese stocks, buy Y611.0 bln bonds, sell Y14.3 bln bills.
- Japan May money supply M2 +3.4% y/y, M3 +2.8%, broadest liquidity +2.1%, April M2 rev +3.4%, M3 rev +2.8%, broadest liquidity +2.7%.
- China May CPI -0.5% m/m, +2.0% y/y, -0.2% and +2.3% eyed, food +5.9% y/y, non-food +1.1%; PPI +0.5% m/m, -2.8% y/y, -3.3% y/y eyed.
- Foreign buyers fuel blazing high-grade US bond market.
- ECB Coeure – Greece needs new round of debt relief – Bloomberg, France 24 TV.
- RBNZ leaves OCR as is at 2.25%, policy to remain accommodative, further ease possible, one more cut built into projections, many uncertainties, NZD higher than appropriate.
- RBNZ DepGov McDermott – Eyeing Fed policy, Brexit, China, NZ hot housing market closely – Reuters.
Economic Data Ahead
- (0330 ET/0730 GMT) Sweden Apr household consumption, unch m/m eyed; last +0.1%.
- (0400 ET/0800 GMT) Italy Q1 unemployment, 11.6% eyed; last 11.5%.
- (0430 ET/0830 GMT) Great Britain Apr trade balance, GBP11.2 bln deficit eyed; last GBP11.2 bln deficit.
- (0430 ET/0830 GMT) Great Britain Apr - non-EU, GBP 3.1 bln deficit eyed; last GBP 3.11bln deficit.
- (0500 ET/0900 GMT) Eurozone May HICP, -0.2% y/y eyed; last -0.4%.
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 270k eyed; last 267k.
- (1000 ET/1400 GMT) United States Apr wholesale sales/inv, +0.7%, +0.1% m/m eyed; last +0.7%, +0.1%.
Key Events Ahead
- China markets closed today-tomorrow, Hong Kong-Taiwan today.
- N/A Brussels Economic Forum - ECB Pres Draghi speaks.
- N/A Slovenia CB Festic speaks at Ljubljana conference.
- (0330 ET/0730 GMT) OECD Business and Finance Outlook, BoI Visco to speak (in Paris).
- (0400 ET/0800 GMT) ECB/Finland CB Liikanen presser on Finland economy, monetary policy.
- (0530 ET/0930 GMT) UK DMO GBP900 mln 0.125% 2036 index-linked Gilt auction.
- (1030 ET/1430 GMT) BoC financial system review
- (1115 ET/1515 GMT) BoC Gov Poloz, BoC Wilkins presser.
FX Beat
USD: The dollar index, against a basket of currencies stood at 93.53, hovering towards a 5-week low of 94.425 touched on Wednesday amid diminishing expectations that the Federal Reserve would raise interest rates as early as its meeting next week.
EUR/USD: The euro rose to a 1-month month high of 1.1415 as German Bund yields touched record lows after the European Central Bank began buying corporate debt for its stimulus programme in a bid to strengthen the eurozone economy. The major continues to rise for the fifth consecutive session as the bulls take advantage from persisting broad based US dollar weakness. The pair trades 0.1 percent higher at 1.1404, hovering towards session high of 1.1415. Markets focus now remains on series of economic data from eurozone economies, ahead of the ECB Chief Draghi’s speech at the Brussels Economic Forum. Immediate resistance is located at 1.1429, break above could take the pair to 1.1459. On the lower side, support is seen at 1.1373 (5-DMA), break below targets 1.1358.
USD/JPY: The Japanese yen continues to rise on the back of risk-off sentiment among the investors. The yen gained 0.3 percent to 106.60 yen, nearing a 1-month high of 106.35 hit on Monday. Japan's money supply for the month of May edged up 3.4 percent y/y, versus market consensus and previous 3.3 percent y/y. Separate data showed that Japan's core machinery orders declined 11 percent in April from the previous month, more than the median estimate of a 3.8 percent drop, in a worrying sign for business investment. The major will continues to track market sentiments around the equities and oil markets, ahead of U.S. weekly jobless claims report, scheduled later in the day. Immediate support is located at 106.51 (Session Low), break below targets 106.35 (June 6 Low/1-month Low). On the higher side, resistance is seen at 107.38 (Previous Session High), break above could take the pair to 107.50/107.65.
GBP/USD: Sterling steadied after declining against the euro and dollar as concerns over the Brexit referendum in two weeks time outweighed a bullish batch of industrial output data. On Wednesday, the major rallied to a high of 1.4600 on the back of better-than-expected U.K. industrial output data, however, it failed to sustain gains over growing worries that a vote to leave the 28-country bloc would leave Britain short of the investment it needs to fund a large trade and current account deficit. Markets now await U.K's trade balance (non-EU) and goods trade balance report for further cues on the pair. Sterling trades 0.1 percent higher at 1.4516, having touched a low of 1.4491 earlier in the session. Immediate resistance is seen at 1.4548 (May-23 High), break above could take the pair to 1.4581/1.4600. On the lower side, support is located at 1.4473 (May-24 Low), break below targets 1.4450. Against the euro, the pound was trading at 78.55 pence.
AUD/USD: The Australian dollar trades flat at 0.7467, after rising to an early high of 0.7504. The Aussie is up 1.5 percent so far this week, pulling closer to this year's peak above 78 cents. The major has advanced after the Reserve Bank of Australia on Tuesday kept rates at a record low of 1.75 percent, taking a pause after last month's cut and recent data showing reasonable strength in the economy. With the Australian economic calendar absolutely data empty, markets focus will remain on U.S. weekly jobless claims report for further momentum on the major. Immediate resistance is located at 0.7504 (Session High), break above targets 0.7535. On the lower side, support is seen at 0.7430 (Previous Session Low).
NZD/USD: The New Zealand dollar rallied to its highest in a year after the Reserve Bank of New Zealand kept interest rates unchanged. The RBNZ held rates at a record low of 2.25 percent at its policy review, defying expectations for an interest rate cut. The kiwi trades 1.7 percent higher at 0.7130 after advancing as far as 0.7147, from around 0.7020 before the policy decision, reaching a high not seen since June 2015. The major is also supported by renewed buying interest seen around the commodities, particularly oil and gold. Markets will now closely watch U.S. unemployment claims data and New Zealand’s electronic card retail sales figures for further cues. Immediate resistance is located at 0.7147 (Session High), break above targets, 0.7191/0.7231. Support is seen at 0.6999 (5-DMA), break below could drag the pair to 0.6970.
Equities Recap
Asian stocks edged up following modest gains on Wall Street overnight, while a weaker dollar supported commodities such as gold and crude oil.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 percent.
Chinese markets will remain closed for two days in observance of the dragon boat festival.
Australia's S&P/ASX 200 index closed flat at 5,369.10 points, Tokyo's Nikkei slumped 0.97 pct at 16,668.41 and Seoul shares lost 0.36 pct.
Commodities Recap
Oil prices remained near 2016 highs, supported by a decline in U.S. crude inventories, a weaker dollar and robust demand. International Brent crude oil futures were trading at $52.71 per barrel at 0639 GMT. U.S. West Texas Intermediate crude was 32 cents higher at $51.55 a barrel.
Gold touched a fresh 3-week high, after advancing 1.5 percent overnight, facilitated by a weaker dollar and fading expectations of an interest rate hike by the Fed at its meeting next week. Spot gold was nearly flat at $1,261.66 an ounce by 0640 GMT, having touched an early $1,266.20, its best since May 18. U.S. gold rose 0.2 percent to $1,265.20.
Treasuries Recap
The U.S. 10-year treasury yield stood at 1.678 pct, its lowest since February versus previous close of 1.707 pct.
Australian government bond futures eased, with the 3-year bond contract 2.5 ticks lower at 98.405. The 10-year contract was flat at 97.8475, while the 20-year contract shed half a tick to 97.2450. The premium between 2-year Australian and U.S. Treasury bonds widen to 92 basis points, away from a decade low of 73 basis points touched late May.
Canadian government bond prices were higher across the maturity curve, with the 2-year price up 1.5 Canadian cents to yield 0.521 percent, and the benchmark 10-year rising 20 Canadian cents to yield 1.199 percent.
