Market Roundup
- BoJ Policy Board leaves policy unchanged, vote 8-1 for money base target, 7-2 for NIRP, Kiuchi dissents on both votes, Sato on NIRP, meeting ended early, no change in policy, no dovish talk contra to some market expectations.
- Japan ChiefCabSec Suga – Recent FX moves rapid, speculative, undesirable, will take steps if needed – Reuters.
- Brexit seen lifting yen with risk-off mood, narrower rate spread - Nikkei.
- MoF flow data week-ended June 11– Japanese buy net Y129.6 bln foreign stocks, Y867.8 bln bonds, sell Y71.1 bln bills; foreign investors buy net Y128.3 bln Japanese stocks, Y764.3 bln bonds, sell Y1.4709 trln bills.
- Japan’s megabanks step away from JGBs – Nikkei.
- Credit downgrade may be positive for Japan’s 10 trln bond market – Reuters.
- Brexit helped keep Fed on hold, could slow future US rate rises, divided Wall Street sees just one Fed rate hike in ’16 – Reuters.
- US April net capital inflow $80.4 bln but foreign holdings of US Treasuries -$74.6 bln, most since 1978, China holdings $1.243 trln, Japan $1.143 trln.
- BoC Gov Poloz – Q2/3 to be very choppy, Q2 flat to negative, Q3 outsized recovery, global economy retains capacity to disappoint, oil prices won’t return to old highs soon, Alberta fires to cut growth 1-1.25%, interest rates to be lower than thought for long time – Reuters.
- RBA AsstGov Kent – China economy to moderate more next few years, weaker AUD would work as buffer - Reuters.
- Australia May employment +17.9k, jobless 5.7%, participation 64.8%, +15k, 5.7% and 64.9% eyed, full-time employment unchanged.
- Australia June MI inflation expectations weighted-mean +2.4% AR, May +2.2%.
- New Zealand Q1 output GDP +0.7% q/q, +2.8% y/y, +0.5%/+2.6% eyed, AR +2.4% as eyed.
- New Zealand Fonterra GDT price index unch, whole milk down, volumes drop at auction.
- Goldman Sachs – GBP could fall 11%, EUR 4%, JPY could rise 14%, CHF 8%, NOK 3% on Brexit - Reuters.
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain May retail sales, +0.2% m/m, +3.9% y/y eyed; last +1.3%, +4.3%.
- (0430 ET/0830 GMT) Great Britain May - ex-fuel, +0.3% m/m, +4.2% y/y eyed; last +1.5%, +4.2%.
- (0500 ET/0900 GMT) Eurozone May inflation – final, +0.3% m/m, -0.1% y/y eyed; last unch, -0.1%.
- (0500 ET/0900 GMT) Eurozone May – ex-food/energy, +0.2% m/m, +0.8% y/y eyed; last unch, +0.7%.
- (0830 ET/1230 GMT) United States May CPI, +0.3% m/m, +1.1% y/y eyed; last +0.4%, +1.1%.
- (0830 ET/1230 GMT) United States May – core, +0.2% m/m, +2.2% y/y eyed; last +0.2%, +2.1%.
- (0830 ET/1230 GMT) United States Q1 c/a balance, $125 bln deficit eyed; last $125.3 bln deficit.
- (0830 ET/1230 GMT) United States Jun Philly Fed business sentiment index, 0.0 eyed; last -1.8.
- (0830 ET/1230 GMT) United States w/e initial jobless claims, 270k eyed; last 264k.
- (1000 ET/1400 GMT) United States Jun NAHB housing market index, 59.0 eyed; last 58.0.
- (1130 ET/1530 GMT) United States May Cleveland Fed CPI; last +0.3%.
Key Events Ahead
- N/A EuroGroup meeting in Luxembourg.
- N/A European Committee of the Regions meeting in Brussels (final day).
- N/A Norges Bank 200th anniversary symposium in Oslo, various speakers.
- N/A Paris banking regulation conference, BdF press conference to follow.
- (0330 ET/0730 GMT) SNB policy announcement, no changes eyed, 3-month LIBOR target -0.75%.
- (0400 ET/0800 GMT) ECB economic bulletin.
- (0430 ET/0830 GMT) Spain E4.5-5.5 bln 0.25/0.75/1.95/4.9% 2019/21/26/40 Bono auctions.
- (0450 ET/0850 GMT) France E5-6 bln 0.5/zero/1.75% 2019/21/23 off-run OAT auctions.
- (0515 ET/0915 GMT) ECB/Austria CB Nowotny speaks in Vienna.
- (0540 ET/0940 GMT) Ireland E500 mln 6-month treasury bill auction.
- (0550 ET/0950 GMT) France E0.75-1.25 bln 0.1% and 1.85% 2021/27 index-linked OAT auctions.
- (0600 ET/1000 GMT) Sweden SEK500 mln each 4.0%, 0.25% 2020, 2022 CPI-linked bond auctions.
- (0700 ET/1100 GMT) BoE MPC policy announcement, 9-0 vote for no changes eyed.
- (0745 ET/1145 GMT) Irish CB Gov Lane speaks in Dublin.
- (0830 ET/1230 GMT) Canada April securities flow data.
- (1115 ET/1515 GMT) ECB Mersch speaks at University of Freiburg.
- (1400 ET/1800 GMT) BoE Gov Carney, UK ChancExch Osborne speak at London bankers dinner.
FX Beat
USD: The dollar index, against a basket of six major currencies eased to 94.30 from a high of 95.04 touched on Wednesday after the Fed said that slower economic growth would limit the pace of monetary policy tightening in future years.
EUR/USD: The euro rose 0.2 percent to 1.1288 from this week's low below 1.1200. The greenback came under pressure after the U.S. Federal Reserve lowered its economic growth forecasts and reduced its rate hike projections. Fed Chair Janet Yellen presser did not give a clear picture on whether a rate increase was imminent at the next policy meeting in late July, however, investors priced out a July rate hike as lack of clear hint meant no hike next month. The dollar also weakened after U.S. manufacturing output unexpectedly declined 0.4 percent in May, recording its biggest drop in nearly 2-1/2 years. Markets now shift focus towards Eurozones and U.S consumer price index data for further momentum on the major. Immediate resistance is located at 1.1306 (10-DMA), break above could take the pair to 1.1321. On the lower side, support is seen at 1.1234 (20-DMA), break below targets 1.1214.
USD/JPY: The Japanese yen surged against the dollar, after the Bank of Japan refrained from expanding its monetary stimulus. The yen rose more than 1 percent, to a 21-month high while the Nikkei 225 index declined more than three percent. The greenback fell to as low as 103.60 yen, its lowest level since August 2014. It last traded at 103.75 yen, down 2.1 percent on the day. BoJ kept interest rate unchanged at- 0.1 percent, in line with consensus and previous, while monetary base target was also unchanged at JPY 80 trillion. Markets focus now remains on U.S. unemployment claims and consumer price index report. Immediate support is located 103.55 level. On the higher side, resistance is seen at 106.02 (Session High).
GBP/USD: Sterling eased after rising to a high of 1.4217 struck in the previous session. Ongoing worries that Britain may vote next week to leave the European Union continue to weigh on the major. Sterling declined 0.3 percent to 1.4161, hovering towards a 2-month low of 1.409 touched on Tuesday. Markets will closely watch Britain’s retail sales data and BoE's interest rate decision for further cues. The central bank is expected to keep the interest rate unchanged at 0.5 percent. Immediate support is located at 1.4115 (Jun-13 Low), break below will drag the pair below 1.4100 level. On the higher side, resistance is seen at 1.4217 (Previous Session High), break above targets 1.4266/1.4327.
AUD/USD: The Australian dollar edged down after rising to a high 0.7436 on the back of better-than-expected Australian employment report. However, the major failed to sustain gains after the RBA assistant governor Kent stated that a lower AUD aided economy rebalancing. Australia’s employment change s.a for the month of May rose to 17.9k against consensus of 15.0k and previous 0.8k, with full time job creation flat at 0. While unemployment held steady at a near three-year low of 5.7 percent. The Aussie trades 0.1 percent lower at 0.7393, pulling away from a peak of 0.7504 touched last week. Immediate support is seen at 0.7359, break below will drag the pair to 0.7333. On the upside, resistance is seen at 0.7436 (Session High).
NZD/USD: The New Zealand dollars held gains against the greenback, supported by better-than-expected Gross Domestic Product data and after the U.S Federal Reserve lowered its rate hike projections. The economy's GDP for the first quarter came in at 0.7 percent q/q/ against forecast of 0.5 percent and previous 0.9 percent. While Q1 GDP y/y stood at 2.8 percent versus 2.6 percent estimates and prior 2.3 percent. The kiwi trades 0.6 percent higher at 0.7078, hovering towards a peak of 0.7147 struck last week. The major is likely to rise amid persistent USD weakness ahead of the US CPI report due later in the day. Immediate support is located at 0.7122 (Jun-10 High), break above targets 0.7147. On the lower side, support is seen at 0.7030 (Session Low), break below could take the pair lower 0.7000 level.
Equities Recap
Asian shares traded lower as the yen rallied on the Bank of Japan monetary policy stance, hours after the Federal Reserve sounded cautious over its policy outlook.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.8 percent after briefly rising in early trade.
Tokyo's Nikkei slumped 3.05 pct at 15,434.14, Australia's S&P/ASX 200 index edged down 0.02 pct at 5,145.90 points and Seoul shares lost 0.88 pct.
Shanghai composite index declined 0.3 pct to 2,876.24 points and CSI300 index shed 0.5 pct to 3,099.53 points.
Hong Kong’s Hang Seng was trading 1.94% lower at 20,071 points. Taiwan stocks close down 1.3 pct at 8,494.14 points
Commodities Recap
Oil prices declined for a sixth consecutive session, following a lower than expected draw on U.S. inventories and amid worries over Britain's vote to leave the European Union. Front-month U.S. crude futures were down 39 cents, or nearly 1 percent, at $47.62 a barrel at 0142 GMT. Brent crude was lower at $48.46 a barrel.
Gold rallied after the Fed lowered its economic growth forecasts through 2017 and indicated it will be less aggressive in tightening monetary policy next year. Spot gold was up 1.5 percent at $1,310.00 an ounce at 0637, its highest since August 2014.
Treasuries Recap
The 10-year U.S. treasuries stood at 1.5413 percent down by 0.053 bps, while the 5-year was at 1.0440 percent, down by 0.055 bps.
Australian government bond futures neared record highs, with the 3-year bond contract up 3.5 ticks at 98.520. The 10-year contract added 5.75 ticks to 97.9750 in a bullish flattening of the curve. The 20-year contract gained 4.25 ticks to 97.3900, with each contract having scaled all-time records in the last 24 hours.
New Zealand government bonds eased, sending yields 1 basis points higher at the long end of the curve.
Canadian government bond prices rose across the maturity curve. The 2-year price rose 3.5 Canadian cents to yield 0.478 percent and the benchmark 10-year climbed 34 Canadian cents to yield 1.083 percent. The Canada-U.S. 2-year bond spread moved by 3.2 basis points to -19.3 basis points, its smallest gap since May 12, as Treasuries outperformed.
