Market Roundup
- USD/JPY +0.01%, GBP/USD +0.4%, EUR/USD +0.25%
- DXY +0.05%, DAX +1.25%, FTSE +1.2%, Brent +1.8%, Iron +1.9%
- EZ Apr C/A s/adj E36.2 bln vs E 26.3 bln revised previous
- EZ Apr Net Inv E128.8 bln vs E22.5 bln revised previous
- EZ Q1 labour costs 1.7% y/y vs 1.3% y/y previous
- EZ Q1 Wages 1.8% vs 1.5% previous
- UK Paddy Power 13/8 Brexit, 1/2-Remain
- Japan FinMin Aso – Very concerned over one-sided, rapid, spec FX moves
- MoF Asakawa – MoF, BoJ, FSA share view volatility up in FX, fin’l mkts
- Source – BoJ offer USD funding with 5 other cbs if mkts roiled by Brexit
- Investors brace for specter of USD/JPY 100 – Nikkei
- Japan Cabinet Office leaves economic assessment as is, CPI rise slower
- EconMin Ishihara – Japan exiting deflation, moving forward
- UK $1.1bn stock fund withdrawals largest in a year – Financial Times
- New Zealand Fonterra – Dairy output to fall 3% this season
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. Commerce Department is likely to report that housing starts declined to a 1.15 million-unit annualized rate in May from a 1.17 million-unit rate in April, while building permits probably increased to a 1.15 million-unit pace from a 1.13 million-unit rate in April.
- (0830 ET/1230 GMT) Canada's annual inflation rate is expected to have decreased to 1.6 percent in May, well below the Bank of Canada's 2 percent target. The core rate is likely to have edged down to 2.1 percent from previous 2.2 percent.
- (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count.
Key Events Ahead
- N/A Bank of Canada Senior Deputy Governor Carolyn Wilkins will give a speech in Calgary on "Fintech and the financial ecosystem: evolution or revolution?".
- (1100 ET/1500 GMT) European Central Bank President Mario Draghi's Speech.
- (1145 ET/1545 GMT) FedTrade operation 30-yr F. Mae/Fr. Mac max $2.475 bln.
FX Beat
USD: The dollar index, against a basket of currencies declined 0.3 percent to 94.32, hovering towards 94.21 previous session low.
EUR/USD: The euro rose 0.3 percent to 1.1256, regaining momentum as the greenback stalls recovery. However, gains were capped over growing concerns on a potential ‘Brexit’ scenario at next week’s EU-UK Referendum. The major was supported by upbeat current account figures and labor wage report. Euro zone's current account surplus widened to €36.2 billion for the month of April versus €26.3 billion in the previous month, while wages rose at an annualized 1.8 percent during Q1. On the higher side resistance is at 1.1300 (May-16 2016). Any break above 1.1300 targets 1.1365/1.1400 level. The support is at 1.1150 and break below targets 1.1100.
USD/JPY: The Japanese yen edged up as the dollar failed to extend it recovery mode. The greenback trades lower at 104.21 yen, after having touched a high of 104.82. The short term trend is weak as long as resistance 105 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 on expectations that the killing of Labor Party Member of Parliament Jo Cox may alter the balance of opinion in Britain's referendum on EU membership. According to Betfair odds, implied probability of a "Remain" vote in rose to 65 percent after declining as low as 60 percent early on Thursday, Sterling was trading 0.4 percent higher at 1.4260, recovering from Thursday's low of 1.4013, its lowest since early April. Against the euro, the pound trades at 78.96 pence. On the higher side, major resistance is around 1.4356 (90 4H EMA) and any break above 1.4356 will take the pair till 1.4400/1.4500. On the lower side, any break below 1.4100 will drag it till 1.4045/1.4000.
USD/CHF: The Swiss franc gained against the dollar amid growing concerns over Britain's vote next week on its European Union membership. The greenback declined 0.2 percent to 0.9627, hovering towards session low of 0.9618. The short term trend is bearish as long as resistance 0.9685 holds. On the lower side any break below 0.9580 will drag the pair further down till 0.9550 (78.6% retracement of 0.94439 and 0.99484)/0.94980. The resistance is around 0.9680 (10 day EMA) and any break above targets 0.9760/0.9810 (21 day MA). The major should close above 0.9780 (90 day EMA) for trend reversal.
AUD/USD: The Australian dollar gained from an unexpected turnaround in the risk sentiment surrounding 'Brexit' after campaigning for Britain's EU membership vote was suspended. The Aussie rose to an early high of 0.7403, however, it failed to extend gains above the 0.7400 level. It was last trading 0.4 percent higher at 0.7388. On the higher side pair is facing resistance at 0.7410 and any break above major resistance will take the pair till 0.7450/0.7515. The major support is around 0.7320 and break below will drag it till 0.7260/0.7205.
NZD/USD: The New Zealand dollar trades flat at 0.7045, supported by a broad based weak sentiment surrounding the greenback. Earlier in the day, the kiwi rose to a high of 0.7068 on the back of better-than-expected first quarter 2016 GDP data. Immediate resistance is located at 0.7093 (Previous Session High), break above targets 0.7100/0.7122. On the lower side, support is seen at 0.7024 (10-DMA).
Equities Recap
European shares rebounded after a third straight week of declines as campaigning for Britain's EU membership vote next week was suspended after the killing of a pro-"Remain" politician.
Europe's FTSEurofirst 300 advanced 1.6 pct to 1,285.51 points, Germany's DAX and France's CAC both climbed 1.4 pct, Britain's FTSE 100 added 1.3 pct.
Tokyo's Nikkei soared 1.07 pct at 15,599.66, however, ended the week down more than 6 percent. Hong Kong's Hang Seng index rose 0.7 pct at 20,169.98 points, but was down 4.1 pct for the week.
Australia's S&P/ASX 200 index increased 0.39 pct at 5,165.90 points and South Korea's Seoul shares edged up 0.14 pct. MSCI's broadest index of Asia-Pacific shares outside Japan was up 1 percent.
Shanghai composite index edged up 0.4 pct at 2,885.11 points, while CSI300 index gained 0.5 pct at 3,110.36 points, and ended the week down 1.4 pct and 1.7 pct, respectively.
Commodities Recap
Crude oil prices rose for the first time in seven days amid volatile trading as Britain goes to the polls over the country's EU membership in less than a week. Brent crude oil was up more than 2 percent at $48.02 a barrel at 1001 GMT after slumping 3.1 percent in the previous session. U.S. West Texas Intermediate crude futures rose 46 cents to $46.67 a barrel, having declined 3.8 percent in the prior session.
Gold gained after declining from a high of $1315 to a low of $1277, its biggest 1-day fall in over three weeks in the previous session and was heading for a third straight weekly gain. Spot gold was up 0.4 percent at $1,284.65 an ounce at 1006 GMT, after recording its biggest 1-day loss since May 24.
Treasuries Recap
The U.S. Treasuries slumped as campaigning over whether Britain should remain in the European Union was suspended for a second day after the killing of a U.K. politician Jo Cox, reducing demand for the safest fixed-income assets. The yield on the benchmark 10-year Treasury note rose more than 4 basis points to 1.606 percent and the yield on short-term 2-year Treasury note also jumped 1-1/2 basis point to 0.697 percent by 11:10 GMT.
UK gilts plunged as fears about a Brexit diminished following the killing of a U.K. politician Jo Cox. Also, rising crude oil prices and firm equities drove-out investors from fixed income securities. The yield on the benchmark 10-year gilts rose more than 4 basis points to 1.142 percent, yield on super-long 30-year bonds also jumped 4 basis points to 1.983 percent and the yield on short-term 2-year note climbed nearly 3 basis points to 0.380 percent by 09:15 GMT.
German bund slumped as the chances of Britain leaving the EU in a vote next week were seen receding after parliament member Jo Cox was shot dead on Thursday. Also, firm crude oil prices and stronger risk sentiments discouraged investors from safe haven buying. The yield on the benchmark 10-year bonds rose more than 2 basis points to 0.002 percent, yield on super-long 30-year bonds jumped 4-1/2 basis point to 0.546 percent and the yield on short-term 2-year note climbed 1/2 basis point to -0.596 percent by 08:40 GMT.
Japanese government bonds plunged Friday as investors cooled on safe-haven instruments amid gains in riskier assets including crude oil and equities. The yield on the benchmark 10-year bonds rose 3 basis points to -0.165 percent, yield on super-long 40-year bonds jumped more than 2 basis points to 0.219 percent, yield on 15-year bonds climbed nearly 3 basis points to -0.019 percent (dip below zero for the first time on Tuesday) and the short-term 2-year JGB yield bounded 1 basis point to -0.265 percent by 06:10 GMT.
The Australian government bonds slumped Friday as investors booked profit, after relishing two weeks of continues rally. Also, firm crude oil prices discouraged investors from safe haven buying. The yield on the benchmark 10-year Treasury note rose 9 basis points to 2.100 percent and the yield on short-term 2-year note jumped 6 basis points to 1.630 percent by 05:15 GMT.
New Zealand government bonds closed higher to finish off the week on Friday as investors wary ahead of Britain’s referendum on European Union membership, scheduled to take place on 23rd June. The yield on the benchmark 10-year bonds fell 1-1/2 basis point to 2.475 percent and the yield on short-term 2-year bonds dipped 2 basis points to 2.105 percent.
