Market Roundup
- USD/JPY -1.65%, GBP/JPY -2.0%, EUR/JPY -1.9%, CHF/JPY -1.8%
- UK May R.Sales +6.0% y/y vs rvsd 5.2% prev, 3.9% exp-Biggest rise since Sept
- EZ May final infl. -0.1% y/y vs -0.1% prev, -0.1% exp
- IPSOS MORI CEO –Leave campaign outgun remain with immigration argument
- MORI poll 51% leave, 49% remain, Paddy Power 11/8 leave, 4/7 remain
- BoJ Policy Board leaves policy unchanged
- BoJ vote 8-1 for money base target, 7-2 for NIRP
- Kuroda sticks script on NIRP, QQE & prices. Points to problems with yen rise
- Kuroda: Current yen rise could have undesirable impact on prices, Japan econ
- Japan ChiefCabSec Suga – Recent FX moves rapid
- Japan Suga Fx speculative, undesirable, will take steps if needed
- Brexit seen lifting yen with risk-off mood, narrower rate spread – Nikkei
- Japan’s megabanks step away from JGBs – Nikkei
- Credit downgrade may be positive for Japan’s 10 trln bond market
- SNB left rates unchanged and continues to warn of CHF intervention
- SNB’s Jordan-Intervention only makes sense if has chance of impact
- SNB’s Maechler-SNB has full team following Brexit on 24-hour basis
- Brexit helped keep Fed on hold, could slow future US rate rises
- Divided Wall Street sees just one Fed rate hike in ’16
- G.Sachs – GBP could fall 11%, EUR 4%, JPY could rise 14%, CHF 8% on Brexit
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. Commerce Department releases current account report for the first quarter. The economy is expected to post a current account deficit of $125.0 billion compared with a deficit of $125.3 billion in the fourth quarter.
- (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have increased 6,000 to a seasonally adjusted 270,000 for the week ended June 11, while continuing claims for the week ending June 3 is expected to rise to 2.120m from 2.095m.
- (0830 ET/1230 GMT) The U.S. Labor Department is likely to show that consumer price index increased 0.3 percent in May, after rising 0.4 percent in April. Core CPI, which excludes energy and food prices, is expected to have risen 0.2 percent, after a similar gain in April.
- (0830 ET/1230 GMT) The statistics Canada will release foreign investments in Canadian securities and foreign securities report for the month of April. Foreign investors bought a net C$17.17 billion in Canadian securities in March, the largest monthly investment in nearly a year.
- (1000 ET/1400 GMT) National Association of Home Builders will release its housing market index for the month of June. The index is expected to edge up to 59 from 58 in prior month.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Natural Gas Storage for the week ending June 10.
- (1800 ET/2200 GMT) Chile's central bank will announce its benchmark interest rate. The central bank is widely expected to leave the benchmark interest rate on hold at 3.5 percent in June.
Key Events Ahead
- (1600 ET/2000 GMT) Bank of England Governor Mark Carney's Speech.
- (1145 ET/1545 GMT) FedTrade operation 30-yr Ginnie Mae max $1.175 bln.
- (1430 ET/1830 GMT) FedTrade operation 15-yr F.Mae/Fr.Mac max $725 mln.
FX Beat
USD: The dollar index, against a basket of currencies was trading 0.3 percent higher at 94.93, hovering towards session high of 95.04 and away from an early low of 94.21.
EUR/USD: The euro declined after rising as high as 1.1294 earlier in the session, just short of 1.1300 level. The major continues to drop, trading 0.6 percent lower at 1.1193. The pair weakened despite Eurozone posting upbeat consumer price index data. Eurozone consumer price index for the month of May came in at 0.4 percent, higher than consensus of 0.3 percent gain and previous 0 percent, while core- consumer price index was in-line with market forecasts. On the higher side resistance is at 1.1250 (21 4H MA). Any break above targets 1.1280/ 1.13000 level. The support is at 1.1180 and break below targets 1.1150/1.1100.
USD/JPY: The Japanese yen gained more than 2 percent against the dollar to hit its strongest level in almost two years, after the Bank of Japan held off from expanding its monetary stimulus programme. The yen strengthened after the Fed lowered its economic growth forecasts and slashed rate hike expectations. The greenback declined to hit a 22-month low of 103.55 yen, however, it regained some ground after BOJ Governor Haruhiko Kuroda said that the central bank won't hesitate in taking additional easing steps if needed to reach its 2 percent inflation target. The major was last trading at 104.30 yen, down 1.6 percent for the day. The short term trend is weak as long as resistance 105.80 holds. The minor resistance is around 105.80 (21 4H EMA) and any break above confirms minor trend reversal, a jump till 106.60/107.25 is possible. On the lower side minor support is around 103.50 and any close below 103.50 will drag the pair till 102.80/102.
GBP/USD: Sterling fell as low as1.4098 after an IPSOS-MORI poll showed that 53 percent would vote to leave next Thursday. Market ignored upbeat retails sales data for the month of May, which came in at 6.0 percent y/y, surpassing previous 5.2 percent and consensus of 3.9 percent, while retail sales ex-fuel rose to 5.7 percent versus previous 4.8 percent. Latest Survation poll shows 45 pct of Britons would vote to leave the EU, while 42 pct of Britons would vote to remain. Sterling trades 0.7 percent lower at 1.4103, hovering towards an early low of 1.4098. Against the euro, the pound trades flat at 79.27 pence. The short term trend is weak as long as resistance 1.4250 holds. On the higher side major resistance is around 1.4250 and any break above 1.4240 will take the pair till 1.4280/1.4325/1.4350. The minor resistance is around 1.4150/1.4180. On the lower side, any break below 1.4100 will drag it till 1.4045/1.4000.
USD/CHF: The Swiss franc slumped against the dollar after SNB left its forecast unchanged for Swiss gross domestic product to grow this year between 1 percent and 1.5 percent. The greenback rose 0.6 percent to trade at 0.9675, pulling away from a low of 0.9571 touched earlier in the session. The short term trend is bullish as long as support 0.9580 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 (55 day 4 HEMA) 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 dropped after rising as high as 0.7436 on upbeat employment report. However, it declined to a low of 0.7344 after RBA assistant governor Kent stated that lower AUD helped economy rebalancing. The Aussie trades 0.7 percent lower at 0.7348, hovering toward session low of 0.74344. On the higher side, the pair is facing resistance at 0.7380 and any break above major resistance will take it till 0.7450/0.7515. The major support is around 0.7320 and break below will drag the pair till 0.7260/0.7205.
NZD/USD: The New Zealand dollar edged down as oil prices declined for a sixth straight session, hitting their lowest in more than 3-weeks. The kiwi rallied to a high of 0.7093 earlier in the day, on the back of better-than-expected New Zealand's GDP report. The major trades flat at 0.7031, but still within the sight of 0.7147 touched last week. Immediate support is located at 0.7013 (10-DMA), break below cold take the pair lower 0.7000 level. On the higher side, resistance is seen at 0.7093 (Session High), break above targets 0.7122/ 0.7147.
Equities Recap
European shares declined, with regional equity indexes falling towards their lowest level in nearly four months as market remain cautious over Britain's vote next week on its European Union membership.
Europe's FTSEurofirst 300 declined 1.2 pct, Germany's DAX lost1.3 pct, France's CAC dropped 1.1 pct and Britain's FTSE nudged down 0.5 pct.
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 South Korea's Seoul shares lost 0.88 pct.
Shanghai composite index ended down 0.5 pct at 2,872.82 points, while CSI300 index declined 0.7 pct at 3,094.67 points. Hong Kong's Hang Seng index slumped 2.1 pct at 20,038.42 points.
Commodities Recap
Oil prices declined for the sixth consecutive day, hitting their lowest in more than three weeks and longest bearish run since early 2016, as U.S. crude inventories dropped less than expected. Brent crude futures were trading at $48.23 by 1045 GMT, the weakest since May 24. Front-month U.S. crude futures were trading at $47.37 a barrel, down 64 cents, and touched a 1-month low of $47.22 earlier in the session.
Gold rallied to its highest in nearly two years after the U.S. Federal Reserve indicated it could be less aggressive in tightening monetary policy next year. Spot gold rose 1.0 percent to $1,304.73 an ounce by 1046 GMT, after touching its highest since August 2014 at $1,313.37. U.S. gold rose 2.2 percent to $1,316.30, after marking its strongest level since last August at 1,316.80.
Treasuries Recap
The U.S. Treasuries rallied in the wake of the June FOMC meeting that saw a diminished outlook for growth coupled with largely downgraded forecasts for the overnight rate, though median expectations remain unchanged for 50 basis points worth of tightening in 2016. The yield on the benchmark 10-year Treasury note fell more than 3 basis points to 1.562 percent and the yield on short-term 2-year Treasury note also dipped 1/2 basis point to 0.681 percent by 11:20 GMT.
UK gilts continue to strengthen as investors have grown increasingly jittery after the recent opinion polls indicated that the momentum is growing for the leave camp. The yield on the benchmark 10-year gilts fell 2 basis points to an all-time low of 1.105 percent, yield on super-long 30-year bonds also dipped 2 basis points to 1.923 percent and the yield on short-term 2-year note tumbled 3 basis points to 0.324 percent by 07:30 GMT.
German 10-year bund yield fell to an all-time low of minus 0.034 percent after the US Federal Reserve lowered its economic growth forecasts and scaled back its rate hike projections, while keeping its benchmark policy rate unchanged at a record low. Also, investors were cautious after recent polls suggested Britain is on course to leave the European Union. The yield on the benchmark 10-year bonds fell nearly 1 basis points to -0.017 percent (it slid to -0.034 percent in the early Asian session), yield on super-long 30-year bonds dipped more than 2-1/2 basis point to 0.516 percent and the yield on short-term 2-year note tumbled 1-1/2 basis point to -0.590 percent by 08:40 GMT.
Japanese government bonds gained after the Bank of Japan (BoJ) kept its policy rate unchanged at record low of -0.1 percent, as expected and signalled room for easing. The yield on the benchmark 10-year bonds fell to all-time low of -0.194 percent, yield on super-long 30-year bonds nearly dipped nearly 5 basis points to 0.168 percent, yield on 15-year bonds tumbled more than 1-1/2 basis points to a record low of -0.040 percent (dip below zero for the first time on Tuesday) and the 20-year JGB yield fell to a record low of 0.115 percent, down more than 3 basis points by 07:25 GMT.
Australian government bonds rallied Thursday after the Federal Open Market Committee (FOMC) left fed funds rate unchanged in a 0.25 to 0.50 percent range, in line with market expectations. The yield on the benchmark 10-year Treasury note fell nearly 6 basis points to 2.014 percent and the yield on short-term 2-year note dipped 5-1/2 basis points to 1.572 percent by 05:35 GMT.
The New Zealand government bonds closed higher Thursday as the Federal Reserve left interest rates unchanged and signalled a more gradual hiking path than previously projected. Also, softer first quarter Gross Domestic Product (GDP) drove investors towards safe-haven assets. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 1-1/2 basis point to 2.445 percent and the yield on short-term 2-year bonds dipped 1/2 basis point to 2.090 percent.
