Market Roundup
- Japan MoF Vice Fin Min Asakawa: Closely watching FX moves
- Asakawa: No objection to G7/G20 stance against competitive FX devaluation
- Asakawa: Excess FX volatility, disorderly moves hurt economy
- Chief Cabinet Secretary Suga: Closely watching FX, stability extremely important
- Euro Zone Jun Sentix index 9.9 vs 6.2 previous, 7.0 exp
- ECB’s Liikanen: Key interest rates to stay as are or lower for extended time – MNSI
- Liikanen: Long-term expectations low in the euro area
- German Apr Industrial orders -0.2% vs 1.9% previous, -0.5% exp
- Italy's M5S looked likely to take charge of Rome after municipal elections at the weekend
- 5-Star Movement (M5S) wants to hold a referendum to decide whether Italy should remain in euro
- Swiss voters rejected by a wide margin proposal to introduce guaranteed basic income
- Brexit polls fuel GBP volatility, TNS & YouGov Brexit polls hurt the pound
- Latest ICM poll shows 43% of Britons would vote to remain in EU, 48% would vote to leave
- Pro-Remain MPs consider using majority to keep Britain inside EU if vote is for Brexit - BBC
Economic Data Preview
- (1000 ET/1400 GMT) United States releases labor market conditions index for the month of May. The index posted a decline of 0.9 percent in April.
- (1901 ET/2301 GMT) British Retail Consortium releases its Retail Sales Monitor for the month of May. The indicator stood at -0.9 percent in April.
- (1930 ET/2330 GMT) Australian Industry Group will report its performance of construction index for the month of May. The index was at 50.8 in the prior month.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade Operation 30-year Ginnie Mae, max $2.375bn.
- (1230 ET/1630 GMT) Federal Reserve Chair Janet Yellen will give a speech on economic outlook and monetary policy to the World Affairs Council of Philadelphia.
- (1430 ET/1830 GMT) Fed's Yellen will participate in a roundtable discussion with Philadelphia Fed President Patrick T. Harker and current and former program participants.
FX Beat
USD: The dollar index, against a basket of currencies rose 0.3 percent to 94.16, having hit a low of 93.855 on Friday, a level last seen on May 12.
EUR/USD: The euro trades 0.1 percent lower at 1.1344, having touched a low of 1.1330 earlier in the session. However, still within the sight of 1.1373, its highest in 3-weeks touched on Friday. The major failed to take advantage from better- than-expected and previous eurozone's sentix investor confidence index. The index for the month of June stood at 9.9 surpassing forecasts of 7.0 an previous 6.2. The short term trend is slightly bullish as long as support 1.1295 holds. Any break below 1.1295 will drag the pair down till 1.1265/1.1230/1.1200. The short term bullish invalidation is only below 1.1100.
USD/JPY: The Japanese yen lost ground against the dollar, as the dollar recovered from a 1-month low of 106.35 struck earlier in the session. The greenback trades 0.5 percent higher at 107.04, hovering towards sessions high of 107.27. Investors have almost decreased the prospects of a rate hike at the Fed Reserve's June 14-15 policy review, and reduced the likelihood of a July rate hike to around 30 percent from around 60 percent. The resistance is around 107.55 and break above will take the pair till 108/108.30/109. On the lower side any break below 105.50 will drag it to104.75/103.90.
GBP/USD: Sterling declined more than1 percent to a 3-week low against the dollar after polls showed "Leave" camp gaining support ahead of the June 23 referendum. The weekly online poll showed voters favored Britain leaving the European Union by 48 percent to 43 percent. Sterling was trading 0.8 percent lower at 1.4395 after having fallen to as low as 1.4351, its lowest since May 16. Against the euro, the pound fell 0.6 percent to 78.72 pence. The short term trend is weak as long as resistance 1.4450 holds. Any break below 1.4450 will take the pair till 1.4520/1.4580/1.4600. Overall bearish invalidation is only above1.4750 (200 day MA). On the lower side any break below 1.4380 will drag the pair till 1.4330/1.42896/1.4240.
USD/CHF: The Swiss franc edged up against the dollar, after rising as high as 0.9749 on Friday. The greenback trades lower at 0.9747, after touching an early high of 0.9775. The major support is around 0.9738 (55 day EMA) and any break below will drag the pair down till 0.9700/0.9660 level. On the higher side resistance is around 0.9800 and any break above targets 0.9840/0.9900/0.9960.
AUD/USD: The Australian dollar recovered after declining to a low of 0.7315, however, it was trading 0.1 percent lower at 0.7352 for the day. The Aussie weakened after the economy's May CPI came in at -0.2 percent m/m, versus previous +0.2 percent and on profit-taking. Markets now await Federal Reserve chair Yellen's speech, ahead of Reserve Bank of Australia policy meeting, for further cues on the major. On the higher side, resistance is located at 0.7380 (55 day EMA) any break above major resistance will take the pair till 0.7410/0.7450. The major support is around 0.7250 and break below will drag it till 0.7180/0.7150.
NZD/USD: The New Zealand dollar trades 0.3 percent lower at 0.6928, pulling away from a high of 0.6960 struck on Friday. The kiwi slumped to an early low of 0.6906, however, it recovered to trade at its current levels. Immediate support is seen at 0.6906 (Session Low), break below could drag lower 0.6900 level. On the higher side, resistance is located at 0.6960 (Previous Session High), break above targets 0.6990.
Equities Recap
European shares rose on the back of commodity stocks as the dollar held near to more than 3-week lows touched after unexpected downbeat jobs data slashed the chances of a rise in U.S. interest rates this month.
The pan-European FTSEurofirst 300 stocks index and Germany's DAX gained 0.1 percent, Britain's FTSE 100 rose 0.9 percent, while France's CAC edged down 0.1 pct.
Tokyo's Nikkei slumped 0.37 pct at 16,580.03, Australia's S&P/ASX 200 index added 0.70 pct at 5,356.00 points and MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.9 pct.
Shanghai composite index lost 0.2 pct at 2,934.10 points, while CSI300 index ended down 0.3 pct at 3,178.79 points. Hong Kong's Hang Seng index closes up 0.4 pct at 21,030.22 points.
Commodities Recap
Brent crude oil prices rose above the $50 barrel mark, as attacks on Nigerian oil infrastructure tightened supplies, however, signs of recovering U.S. output limited gains. Brent crude futures were up at $50.12 a barrel at 1035 GMT. U.S. crude futures were up 60 cents at $49.22 a barrel.
Gold touched a 2-week high before edging down slightly, following its biggest 1-day gain in nearly four months in the previous session after lower-than-expected U.S. employment data reduced the prospects of a near-term U.S. rate hike. Spot gold was down 0.2 percent to $1,240.46 per ounce by 1037 GMT. It touched a high of $1,248.54, its best since May 24 earlier in the session. U.S. gold was flat at $1,243.20.
Treasuries Recap
US Treasuries saw a sharp rally across the curve, following the weaker than expected May employment report, highlighted by a modest +38k increase in non-farm payrolls. Markets now look ahead to a relatively light week of data this week, largely highlighted by Michigan consumer sentiment on Friday. However, the event of the week may likely turn out to be commentary from Fed Chair Yellen on Monday, which could serve to shine the light on Fed thinking in the wake of the May employment report. Additionally, markets receive 3-Year Note, 10-Year Note and 30-Year Bond auctions on Tuesday, Wednesday and Thursday, respectively. On Friday, the 2-Year yield saw considerable downward pressure on the session, breaking below 0.80 percent mark, alongside a similar decrease in the 10-Year yield, pushing down to around 1.70 percent. Meanwhile, the yield on the benchmark 10-year Treasury note rose 2 basis points to 1.725 percent by 11:25 GMT.
The Eurozone government bonds traded mixed after data showed softer than expected US May employment, which dampened prospects for any near-term action from the US Federal Reserve on interest rates hike. Also, growing concerns over whether Britain will stay in the European Union pinned European bonds. On the other hand, firm crude oil prices drove-out investors from safe-haven buying. Moreover, investors await Federal Reserve Chair Janet Yellen's speech at 16:30GMT in an attempt to estimate the Fed's likely next step to raise the interest rate. The benchmark German 10-year bonds yield, which moves inversely to its price hovered below 0.070 percent mark, French 10-year bunds yield rose 1 basis point to 0.435 percent, Irish 10-year bonds yield moved up 3 basis points to 0.768 percent, Italian equivalents inched higher 5 basis points to 1.383 percent, Netherlands 10-year bonds yield up 1/2 basis points to 0.294 percent, Portuguese 10-year bonds yield jumped 5 basis points to 3.228 percent, Spanish 10-year bonds yield climbed 4 basis points to 1.507 percent and British 10-year bonds yield fell 1-1/2 basis points to 1.265 percent by 10:15 GMT.
The German bund yields fell below 0.10 percent mark as well as break its April low of 0.07 percent after reading weaker than expected US employment report on Friday, which dampened prospects for any near-term action from the US Federal Reserve on interest rates hike. Moreover, investors await Federal Reserve Chair Janet Yellen's speech that is likely to clear the air on Fed's stance on interest rate hike. Meanwhile, the yield on the benchmark 10-year bonds rose ½ basis points to 0.081 percent after ECB's Nowotny said that inflation is forecast to rise and the phase of acute deflation risk is over. The yield on short-term 2-year bonds remained steady at -0.533 percent by 09:00 GMT.
The Japanese government bonds gained as a Yen surged after data showed that US payrolls grew at the slowest pace in almost six years, which dampened prospects for a rate increase by the Federal Reserve in the near term. On the contrary, investors were cautious ahead of Federal Reserve Chair Janet Yellen's speech later in the session, which limited the fall in JGB yields. The yield on the benchmark 10-year bonds, which moves inversely to its price, fell near to 2 basis points to -0.116 percent, yield on super-long 40-year bonds also dipped 1 basis point to 0.382 percent and short-term 2-year bonds yields tumbled ½ basis points to -0.247 percent by 07:00 GMT.
The Australian government bonds rallied as investors poured into safe-haven instruments after U.S. payrolls grew at the slowest pace in almost six years, which dampened prospects for a rate increase by the Federal Reserve in the near term. The yield on the benchmark 10-year Treasury note which moves inversely to its price fell to all-time low by 8 basis points to 2.161 percent and short-term 2-year bonds yield dipped 5-1/2 basis point to 1.603 percent by 05:15 GMT.
