Market Roundup
- Fitch BoE likely to lower int. Rates to 25bps later this year
- First declared UK PM candidate, Stephen Crabb-Daily Telegraph
- First Minister Sturgeon, Scotland determined to stay in the EU
- GBP/USD +0.3%, USD/JPY -0.1%, EUR/USD -0.03%
- DXY +0.04%, DAX +1.63%, Brent +0.9%, Iron +0.7%
- UK Jun N/wide Hse px +5.1% y/y vs 4.7% previous, 4.9% exp
- UK May Cons Cr GBP1.503 bln vs GBP1.294 bln previous, 1.4 bln exp
- UK May mtg Lending GBO2.824 bln vs 112 mln previous, 2.2 bln exp
- EZ Jun Econ/Sent 104.4 vs 104.6 and 104.7 exp
- CNY market to-do at open on incorrect PBOC rate cut alert
- PBOC said to intervene in offshore Yuan mkt for stability
- EU Tusk – Orderly exit of UK in everyone’s interests
- Tusk must let dust settle but talks must start ASAP
- Fed Gov Powell – Brexit has shifted global risks further to downside
- Shibayama: Won't rule out solo intervention
- Japan PM Abe – BoJ to ensure market liquidity-functioning
- BoJ Gov Kuroda – Will provide funds to market as needed
- FinMin Aso – Market appears to be stabilizing
- RBNZ – Uncertainties but econ expanding, some financial stability risk
Economic Data Preview
- (0830 ET/1230 GMT) The U.S. releases personal income figures for May, which is expected to edge down 0.3 percent from 0.4 percent in April.
- (0830 ET/1230 GMT) The U.S. consumer spending likely increased 0.4 percent after surging 1.0 percent in April.
- (0830 ET/1230 GMT) The personal consumption expenditures (PCE) price index, excluding food and energy, is likely to have gained 0.2 percent, after a similar gain in April.
- (1000 ET/1400 GMT) The National Association of Realtor is likely to report that pending home sales declined 1.1 percent in May, after rising 5.1 percent in April.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Crude Oil Stocks for the week ending June 24.
- N/A The Fed will release its stress test report, called Comprehensive Capital Analysis and Review for the largest U.S. banks.
- (1500 ET/1900 GMT) Argentina will release GDP figures for the first quarter.
Key Events Ahead
- N/A European Union leaders will meet on the second day of their summit without British counterpart David Cameron to discuss the "divorce process" with London, after Britons voted to leave the bloc.
- N/A European Central Bank President Mario Draghi participates in a policy panel at the ECB Forum on Central Banking.
- N/A ECB board member Vitor Constancio participates in a session on "Financial regulatory changes" at the forum.
- N/A Treasury Secretary Jack Lew, Consumer Financial Protection Bureau Director Richard Cordray, and Labor Secretary Thomas Perez participate in the Financial Literacy and Education Commission meeting in Washington to discuss financial education and investment advice, and the intersection of financial education and legal aid.
- N/A Canadian Prime Minister Justin Trudeau will host a day-long summit with U.S. President Barack Obama and Mexican President Enrique Pena Nieto.
- (1430 ET/1830 GMT) FedTrade ops 15-yr Fannie Mae/Freddie Mac max $675 mln.
FX Beat
USD: The dollar index, against a basket of currencies edged down to 95.97, hovering towards a low of 95.78 touched earlier in the session.
EUR/USD: The euro gained as market sentiment continues to favour the riskier assets. The major rose to an early high of 1.1103, however, it failed to extend gains above 1.1100 level, last trading at 1.1078, 0.1 percent up. Markets will continue to track developments surrounding the referendum as the European Council meets for the second day to discuss Britain's vote to end its membership with the EU. Investors will also closely watch series of U.S economic data for further momentum. The short term trend is slightly weak as long as resistance 1.1188 holds. Any break above 1.11015 will take the pair to next level till 1.1188 /1.1235 (61.8% retracement of 1.14278 and 1.109119). On the lower side any break below 1.09700 (Jun -27 Low) will drag the pair down till 1.0900 (161.8% retracement of 1.14155 and 1.0971/1.0834 (61.8% retracement of 1.10852 and 1.09119).
USD/JPY: The Japanese yen edged up against the dollar as worries over Brexit triggered global market turmoil, kept many investors cautious. The greenback declined 0.1 percent to 102.64 yen, having touched an early low of 102.17. Japanese Prime Minister Shinzo Abe urged the Bank of Japan to provide sufficient funds to liquidate the markets. Markets attention now remains on series of U.S economic data, including Pending Home Sales, Personal Income/ Spending and inflation, while focus will also remain on the developments from the EU Summit. The short term trend is slightly bearish as long as resistance 103.50 holds. The minor resistance is around 103.50 and any break above confirms minor trend reversal, a jump till 105/105.80 is possible. On the lower side minor support is around 101.40 and any break below 101.40 will drag the pair till 100/98.80/98.
GBP/USD: Sterling edged up for a second straight session, but gains were limited as investors wary on UK's growth and investment after Britain voted last week to leave the European Union. Investors were provided some hope as British lawmakers were not in a hurry to trigger the Article 50 mechanism for a state to leave the EU, despite European leaders intimating Britain to act quickly. Sterling rose 0.5 percent to 1.3406, attempting to sustain gains above the 1.3400 level. Against the euro, the pound was trading 0.2 percent higher at 82.69 pence. On the higher side, major intraday resistance is around 1.3500 and any break above will take the pair till 1.365/1.380/1.4000. On the lower side, any break below 1.3220 will drag the pair till 1.3110/1.3020.
USD/CHF: The Swiss franc gained following losses in the previous three sessions. The greenback edged down 0.1 percent to 0.9807, pulling away from a 3-week high of 0.9836 touched on Tuesday. The short term trend is bullish as long as support 0.9740 holds. On the higher side, any break above 0.9835 will take the pair to next level till 0.99075/0.9960 level. The downside has been capped by daily Kijun-Sen and any break below targets 0.9679 (daily Tenken-Sen)/0.9630/0.9580. Overall bullish invalidation is only below 0.9500 level.
AUD/USD: The Australian dollar rose above the 0.7400 level, but the gains were capped as investors remain wary on persisting uncertainty over the global economy post-Brexit. The Aussie gained largely on the back of higher stocks and oil prices, which boosted overall market sentiment. The major trades 0.8 percent higher at 0.7441, hovering towards 0.7450 level. On the higher side, resistance is located at 0.7450 and any break above major resistance will take the pair till 0.7510/0.7580. The major support is around 0.7320 and break below will drag the pair till 0.7280/0.7250.
NZD/USD: The New Zealand dollar gained more than 1 percent, supported by risk-on market profile amid rebounding global equities and oil prices. The Kiwi rose 1 percent to 0.7117, extending gains above the 0.7100 level. Market will continue to track the broader market sentiment ahead of series of economic data from the U.S. Immediate resistance is located at 0.7147 (Jun-9 High), break above targets 0.7169. On the lower side, support is seen at 0.6985 (Previous Session Low).
Equities Recap
European shares recovered as investors expect easier monetary policy over the next six months and hopes that Britain will remain closely integrated with Europe.
Europe's FTSEurofirst 300 gained 0.3 pct, Germany's DAX and France's CAC both rose 1.2 pct and Britain's FTSE 100 share index added 1.4 percent.
Tokyo's Nikkei gained 1.59 pct at 15,566.83, Australia's S&P/ASX 200 index nudged up 0.82 pct at 5,145.30 points, South Korea's Kospi 200 rose 1.18 pct and MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.0 percent.
Shanghai composite index rose 0.7 pct at 2,931.59 points, while CSI300 index climbed 0.5 pct at 3,151.39 points. Hong Kong’s Hang Seng index advanced 1.3 pct at 20,436.12 points.
Commodities Recap
Oil rose for a second straight session on the back of a potential strike in Norway and crisis in Venezuela threatened to cut supply. Brent crude oil was trading 0.8 percent higher at $49.15 per barrel at 1031 GMT, while U.S. crude was had climbed 44 cents to $48.29 a barrel.
Gold reversed most of previous session losses as uncertainty due to Brexit vote continued to pressure financial markets, strengthening the safe-haven metal. Spot gold rose 0.4 percent to $1,316.57 an ounce by 1034 GMT, up for a third session in four. U.S. gold also was up 0.4 percent at $1,323.50.
Treasuries Recap
The US Treasury gains finally stalled on Wednesday, alongside a rebound in equity prices and a renewed push in crude oil prices back towards the $50 mark. Overall, the 2-year yield pushed higher on the session, breaking back above 0.60 percent, alongside a greater increase in the 10-year yield, back above 1.45 percent.
The UK 10-year gilt yield has stabilized between Monday's record-low of 0.93 percent and the 1.00 percent mark and will probably hover in this area (with risks on the downside) in the absence of further information about the country's post-referendum situation. Also, rallying crude oil prices and firm equities market limited the fall in bond yield. The yield on the benchmark 10-year gilts rose 1 basis point to 0.972 percent, yield on super-long 30-year bonds fell 1 basis points to 1.798 percent and the yield on short-term 2-year note bounced 2-1/2 basis points to 0.215 percent by 09:40 GMT.
The Eurozone bond yields hit record low levels amid expectations for further monetary stimulus to offset the negative impact of last week's Brexit vote on the eurozone economy. The benchmark German 10-year bonds yield, which moves inversely to its price fell 1 basis point to -0.129 percent, French 10-year bund yield dipped 2-1/2 basis points to 0.214 percent, Irish 10-year bonds yield moved down 4 basis points to 0.618 percent, Italian equivalents inched lower 1-1/2 basis points to 1.311 percent, Netherlands 10-year bonds yield tumbled 0 basis points to 0.097 percent and the Portuguese 10-year bonds yield dwindled 2-1/2 basis points to 3.132 percent by 11:25 GMT.
Long-dated Japanese government bonds plunged as investors cashed in profit after sovereign bonds climbed to its record levels after the United Kingdom voted to end 43 years of European Union membership last week. Also, rallying crude oil prices and firm equities discouraged traders from safe-haven buying. The yield on the benchmark 10-year bonds rose ½ basis points to -0.217 percent, yield on 15-year bonds jumped 1-1/2 basis points to -0.071 percent, super-long 30-year JGB yield climbed nearly 4 basis points to 0.097 percent and 20-year bond yield ticked up 2-1/2 basis points to 0.070 percent by 07:00 GMT.
The New Zealand government bonds closed modestly higher as investors are expecting a rate cut from the Reserve Bank of New Zealand (RBNZ) in the coming months if things worsen significantly due to ongoing Brexit uncertainty. The yield on benchmark 10-year bond fell 1 basis point to 2.355 percent in the last session, yield on 7-year note also dipped 1 basis point to 2.065 percent and the yield on short-term 2-year note ended steady at 2.015 percent.
The Australian government bonds slumped as investors switched to risk-on mode after two days of mayhem. Also, Investors shifted from safe-haven buying after markets saw modest further gains in first quarter US GDP revisions, finishing off around +1.1 percent, a significant improvement from the preliminary release. The yield on the benchmark 10-year Treasury note rose more than 2-1/2 basis points to 2.022 percent and the yield on short-term 2-year note jumped 4 basis points to 1.614 percent by 05:10 GMT.
