Market Roundup
- GBP/USD +0.23%, USD/JPY -0.24%, EUR/USD +0.45%
- DXY -0.3%, DAX +0.6%, Brent +1.05%, Iron +3.48%
- Switzerland Jun ZEW Inv Sent 19.4 vs 17.5
- Sweden Jun Cons Sent 98.7 vs 96.00 previous
- Sweden May Unemployment 7.6% vs 7.3% previous,7.2% exp
- South Africa May Core CPI 5.5% y/y vs 5.5% previous,5.6% exp
- William Hill-3/1 Brexit EU, 2/9 Britain votes to remain
- 61% of Japanese firms support delay in sales tax hike
- 60% Japanese concerned over ccy swings on Brexit
- Australia May Westpac/MI leading index 97.0, 96.8 previous
Economic Data Preview
- (0830 ET/1230 GMT) Canada's retail sales are likely to have increased 0.9 percent in April after posting a -1.0 percent decline in March.
- (0900 ET/1300 GMT) The Federal Housing Finance Agency releases it Housing Price Index for the month of April. The index stood at 0.7 percent in the prior month.
- (1000 ET/1400 GMT) The National Association of Realtors are expected to report that U.S. home resales rose 1.1 percent in the month of May, to an annual rate of 5.54 million units, following a 1.7 percent gain in April.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Crude Oil Stocks for the week ending June 17.
Key Events Ahead
- (0945 ET/1345 GMT) FedTrade operation 30-yr Fannie Mae/Freddie Mac max $2.475 bln.
- (1000 ET/1400 GMT) The U.S. Federal Reserve Chair Janet Yellen testifies before the House Financial Services Committee at its "Monetary Policy and the State of the Economy" hearing, in Washington.
- (1030 ET/1430 GMT) Treasury Secretary Jack Lew participates in joint news conference on Social Security and Medicare Trustees Reports, in Washington.
- (1300 ET/1700 GMT) U.S. Treasury acting Director for the Office of Foreign Assets Control John Smith testifies at hearing, "Venezuela's Crisis: Implications for the Region," before the House Foreign Affairs Committee.
- N/A U.S. Commerce Secretary Penny Pritzker is scheduled to address an Organisation for Economic Cooperation and Development ministerial meeting in Cancun, Mexico.
FX Beat
USD: The dollar index, against a basket of currencies trades lower at 93.87, after having touched an early low of 93.74.
EUR/USD: The euro rose on renewed optimism after latest poll published showed Bremain keeping the lead. The major trades 0.4 percent higher at 1.1283, having touched a high of 1.1300 level. Markets now await U.S. economic releases and Yellen’s round 2 of testimony, ahead of Brexit referendum. The pair has taken support near 61.8% retracement and started to jump from that level. Any break above 1.1284 confirms minor trend reversal, a jump till 1.13265 (61.8 % retracement of 1.13825 and 1.12365) /1.13495/1.13825. On the lower side, any break below 1.12275 will drag the pair down till 1.1200/1.1180/1.1130.
USD/JPY: The Japanese yen gained as the dollar weakened across the board. The greenback was weighed down after Fed Chair Janet Yellen stated that the economic outlook was uncertain and that monetary policy was not on a preset course. The major declined 0.1 percent to 104.58 yen, however, still within the sight of 105.05 touched in the previous session. The short term trend is slightly bullish as long as support 103.50 holds. The minor resistance is around 105 and any break above confirms minor trend reversal, a jump till 105.75/106.60 is possible. On the lower side minor support is around 103.50 and any close below 103.50 will drag the pair till 102.80.
GBP/USD: Sterling rose against the euro and the dollar, as investors reduced bets on the last day of campaigning before Britain's referendum on EU membership. As the polls shifted towards the "Remain" camp, since the shooting of British lawmaker last week has helped sterling recover 5 percent from lows around $1.40. A telephone poll published on Tuesday and conducted by Survation for spread-betting firm IG on Monday, showed support for "Remain" at 45 percent, ahead of "Leave" at 44 percent. Sterling trades 0.2 percent higher at 1.4675, hovering towards a 5-1/2-month high, touched in the previous session. On the higher side, major resistance is around 1.4780 and any break above 1.4782 will take the pair till 1.4845/1.4900. On the lower side, any break below 1.46000 will drag it till 1.4545/1.4500. Against the euro, the pound declined 0.3 percent to trade at 76.96 pence.
USD/CHF: The Swiss franc regained some ground against the dollar, as investors remain cautious a day before Britain votes on whether to stay in or leave the European Union. The greenback declined 0.4 percent to 0.9580, hovering towards a low of 0.9568, touched early May. On the downside, firm break below 0.9580 confirms rebound from 0.9578 has ended and a further decline till 0.9500/0.9445 is possible. The major resistance is at 0.9630 (daily Tenken-sen) and any break above will take the pair to next immediate resistance at 0.9690/0.9765 (50 % retracement of 0.99508 and 0.95780)/0.9780. The price should break above 0.9780 for further bullishness.
AUD/USD: The Australian dollar rose as selling pressure in the greenback across the board combined with demand for oil prices led to a renewed rally in the Aussie. The major trades 0.6 percent higher at 0.7493, hovering towards a high of 0.7512 struck in the previous session. On the higher side pair is facing resistance at 0.7510 and any break above major resistance will take the pair till 0.7580/0.7600. The major support is around 0.7440 and break below will drag it till 0.7370/0.7320.
NZD/USD: The New Zealand dollar rallied to a yearly high, supported by risk-on market profile as markets expect Britain will vote to stay in the European Union. The kiwi trades 0.7 percent higher at 0.7168, having touched 2016 high of 0.7174. The major gained on the back of oil prices, which rose for the fourth consecutive session. Immediate resistance is located at 0.7200 level, while on the downside, support is seen at 0.7099 (5-DMA).
Equities Recap
European shares rose while traditional safe-haven assets gold and bonds declined, as investors expect Britain will vote to stay in the European Union at the referendum later this week.
Europe's FTSEurofirst index of 300 leading shares was up 0.1 percent, Germany's DAX gained 0.5 percent, France's CAC 40 rose 0.2 percent and Britain's FTSE 100 climbed 0.3 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, registering its fourth straight daily gain.
Tokyo's Nikkei declined 0.64 pct at 16,065.72, Australia's S&P/ASX 200 index rose 0.23 pct at 5,286.30 points and South Korean Kospi gained 0.44 pct.
Shanghai composite index and CSI300 index both gained 0.9 pct at 2,905.55 points and 3,133.96 points, respectively. Hong Kong's Hang Seng index added 0.6 pct at 20,795.12 points.
Commodities Recap
Oil rose for the fourth consecutive session after an industry report showed a large decline in U.S. crude inventories, with analysts expecting volatile trading ahead of Britain's referendum on EU membership. Brent crude was up at $51.05 a barrel at 1045 GMT. U.S. crude climbed 46 cents to $50.31, marking its first rise above $50 since June 10.
Gold declined to a 2-week low, as rising expectations that Britain will vote to remain in the European Union calmed risk aversion. Spot gold was down 0.2 percent at $1,265.49 an ounce at 1043 GMT, having touched an early 2-week low of $1,261.07, while U.S. gold futures for August delivery were down $4.00 an ounce at $1,268.50.
Treasuries Recap
The U.S. Treasuries were little changed on Wednesday, finding modest downward pressure in the wake of the first leg of Fed Chair Yellen’s semi-annual monetary policy testimony before Congress (before the Senate Banking Committee). As expected, Yellen chose to avoid drifting far away from tone set by the June FOMC statement, highlighting some concern regarding slower employment gains and maintaining a sense of continued caution that the Fed has chose to adopt in determining the future of interest rates. The yield on the benchmark 10-year Treasury note hover around 1.69 percent mark by 11:00 GMT.
The UK 10-year gilt yield climbed to 1.30 percent mark for the first time in two weeks, which we expect to stay ahead of the referendum outcome. Also, the Gilt/Bund yield spread has widened to nearly 125 basis points resistance, where we similarly think it should pause. After all, despite market confidence in a Remain vote, we would highlight that polls show the outcome is too close to call. The yield on the benchmark 10-year gilts rose 2 basis points to 1.308 percent and the yield on super-long 40-year bond climbed 1-1/2 basis points to 1.944 percent by 09:30 GMT.
The German bunds were little changed during a relatively quiet session as investors await the Brexit vote on Thursday. Also, we expect it to trade in a range bound ahead of the referendum outcome. The yield on the benchmark 10-year bonds hovered around 0.05 percent mark, yield on super-long 30-year bonds rose 1/2 basis point to 0.647 percent and the yield on short-term 2-year note also remained steady at -0.583 percent by 09:00 GMT.
The Japanese government bonds traded nearly flat Wednesday, succumbing to thin trading activity as jittery investors looked ahead to Britain's vote on European Union membership scheduled to begin early morning London time Thursday June 23. The yield on the benchmark 10-year bonds rose hovered around -1.13 percent and the short-term 2-year JGB yield remained steady at -0.239 percent by 06:25 GMT.
The New Zealand government bonds closed mixed as the recent polls showed Brexit fears among investors started to fade, boosting risk sentiments. On the contrary, investors preferred to stay risk-averse after China private firms' factory activity tumbled to a 4-month low. The yield on benchmark 10-year bond fell 1 basis point to 2.570 percent, yield on 7-year note jumped 3 basis points to 2.275 percent and the yield on 5-year bond dipped 1 basis point to 2.210 percent.
The Australian government bonds plunged as investors cooled on safe-haven instruments amid gains in riskier assets including crude oil and equities. Also, rising Bremain support in the latest poll and the RBA's neutral stance on Tuesday June meeting minutes discouraged investors from safe-haven buying. The yield on the benchmark 10-year Treasury note rose nearly 6 basis points to 2.170 percent and the yield on short-term 2-year note jumped more than 4 basis points to 1.724 percent by 05:25 GMT.
