Market Roundup
- GBP/USD +1.73%, EUR/USD +0.45%, USD/JPY +0.3%
- DXY +0.001%, DXY +3.13%, Brent +1.4%, Iron +0.8%
- UK William Hill 5/2 for Brexit, 3/1 for remain
- Sunday Times and Sunday Telegraph advocated Brits vote to leave
- Mail on Sunday says Brits should vote to remain in EU
- Implied probability of a remain vote 72% vs 65% Friday-Betfair odds
- Germany May Producer Prices +0.4% m/m vs 0.1% previous, 0.3% exp
- Germany May Producer Prices -2.7% y/y vs -3.1% previous, -2.8% exp
- BoJ Kuroda: Hard to lay out tools for contingencies in advance
- Kuroda: Decline in potential growth rate likely to exert downward on econ
- Kuroda: Positve impact on econ from NIR is already starting to be seen
- Kuroda: Direct impact of NIR on profitability of Jpn banks really limited
- IMF: Japan needs bold reforms to spark economic revival
- SNB-Total and domestic sight deposits increase in latest week
- Three of six UK opinion polls show shift towards “remain” – Reuters FACTBOX
- EU banking watchdog to leave London in case of Brexit
- Germany FinMin - German econ had good Q2 start, upswing to continue
- BoJ holds more than a third of all JGBs – Nikkei
- PBOC established direct FX trading between CNY, ZAR
- Nigeria CB removed fixed exchange rate peg-NGN loses indicated 28%
Economic Data Ahead
- (0830 ET/1230 GMT) Canadian wholesale trade is likely to have rebounded 0.5 percent in April, after it declined by 1.0 percent in March, weighed down in part by weaker sales in the motor vehicles and parts subsector.
- (1030 ET/1430 GMT) The Conference Board Australia releases its leading index for the month of April. The index stood at 0.1 percent in the prior month.
Key Events Ahead
- (1215 ET/1615 GMT) Federal Reserve Bank of Minneapolis President Neel Kashkari chairs "Panel 2: Shortfalls of Current Policies Towards Banks" before the third symposium on "Ending Too Big to Fail," co-hosted by the Federal Reserve Bank of Minneapolis and the Peterson Institute for International Economics, in Washington.
- (1145 ET/1545 GMT) FedTrade operation 30-year Ginnie Mae max $1.175 bln.
- N/A Canada Finance Minister Bill Morneau will hold a two-day meeting with provincial counterparts to discuss the proposed expansion of the Canadian Pension Plan.
- (1925 ET/2325 GMT) Reserve Bank of Australia Assistant Governor Guy Debelle's Speech.
FX Beat
USD: The dollar index, against a basket of currencies stood at 93.73, having declined to an 11-day low of 93.45 earlier in the session.
EUR/USD: The euro lost upside momentum and eased back to the weekly price-gap opening level. The major was trading at 1.1326, having touched a session 7-day high of 1.1382. The major strengthened after latest 'Brexit' polls showed the 'Remain' camp gaining lead in the upcoming referendum on Thursday. However, Euro zones downbeat construction output data weighed down the pair. Eurozone's April construction output w.d.a declined to 0.4 percent after rising to 0.5 percent in the prior month. On the higher side, resistance is at 1.1420 (Jun- 9 High). Any break above 1.1420 targets 1.1440/ 1.1500 level. The minor resistance is around 1.1360/1.1400. The support is at 1.1280 and break below targets 1.12450/1.1215.
USD/JPY: The Japanese yen declined against the greenback, as easing Brexit worries boosted risk appetite, hurting the perceived safe-haven demand for the yen. The major trades between a thin range of 104.37 -104.84 amid broad-based U.S. dollar selling pressure. The greenback last stood at 0.4 percent higher at 104.55 yen. In absence of any major economic releases, the pair will be driven prevailing investor sentiment surrounding the crucial UK-EU referendum. 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 rallied more than 2 percent against the dollar, putting it on track for its biggest one-day gain for more than seven years, as worries eased that Britain might vote to leave the European Union at a June 23 referendum. According to Betfair odds, implied probability of remain vote in Britain's EU referendum rose to 74.6 percent on Monday from 65 pct. Sterling rose as high as 1.4672, hitting a 3-week high before easing to 1.4633, putting it on track for its biggest one-day rise. On the higher side, major resistance is around 1.4700 (200 day MA) and any break above 1.4356 will take the pair till 1.4740/1.4780. On the lower side any break below 1.46000 will drag it till 1.4545/1.4500.Against the euro, the pound climbed 1.7 percent to hit a 2-1/2 -week high of 77.30 pence and was trading at 77.15 pence.
USD/CHF: The Swiss franc edged down against the dollar as investors turned towards risky assets on easing fears over Britain's vote to leave the European Union membership. The greenback trades up at 0.9594, having touched a high of 0.9640, earlier in the session. 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 0.9640 (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 edged up, supported by improved risk appetite after opinion polls before Thursday's vote showed the 'Remain' camp gaining some traction. Risk-on sentiment across the equity markets and rallying commodity prices boosted the Aussie. The major trades 0.7 percent higher at 0.7450, having touched an early high of 0.7471 and away from last Thursday's trough of 0.7285. On the higher side, resistance is seen at 0.7510 and any break above major resistance will take the pair till 0.7580/0.7600. The major support is around 0.7370 and break below will drag it till 0.7320/0.7285.
NZD/USD: The New Zealand dollar rose, largely supported by a fresh risk-on rally seen across the risky assets. The Kiwi gained for a fourth consecutive session as markets reacted positively to the latest polls favoring the Remain campaign ahead of this Thursday’s EU referendum. The Westpac/McDermott Miller Consumer Confidence index declined to 106.0 in the June quarter from 109.6 in the previous quarter. The major trades 0.9 percent higher at 0.7111, after hitting a high of 0.7126. Immediate resistance is located at 0.7147 (Jun-9 High), break above targets .7200 level. On the downside, support is seen at 0.7050 (Session Low).
Equities Recap
European shares gained after latest polls showed increasing possibility of Britain voting to remain in the European Union before Thursday's referendum.
The pan-European FTSEurofirst 300 index advanced 2.9 percent, Germany's DAX rose 2.4 pct, France's CAC gained 2.6 pct and Britain's FTSE 100 index added 2.1 pct.
Tokyo's Nikkei soared 2.34 pct at 15,965.30, Australia's S&P/ASX 200 index nudged up 1.66 pct at 5,248.50 points, South Korean Seoul shares gained 1.49 pct and MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.6 percent.
Shanghai composite index and CSI300 index both edged up 0.1 pct at 2,888.81 points and 3,112.67 points, respectively. Hong Kong’s Hang Seng index added 1.7 pct at 20,510.20 points.
Commodities Recap
Oil prices rose, supported by a weaker dollar after polls showed a rising chance that Britain may vote to stay in the European Union later this week. Brent crude oil was up 1.8 percent at $50.15 a barrel by 1211 GMT. NYMEX crude for July delivery, which expires on Tuesday, was up 80 cents at $48.78 a barrel.
Gold eased more than 1 percent, reversing most of previous session gains as polls ahead of a referendum showed Britain could vote to remain in the European Union. Spot gold declined 1.2 percent to $1,281.11 an ounce at 1212 GMT, having touched a low of $1,279.95 earlier in the session. U.S. gold dropped 0.6 percent to $1,287.30.
Treasuries Recap
The U.S. Treasuries saw selling in the belly and long-end of the curve after polls showed support for Britain staying in the EU regaining momentum before Thursday’s referendum. Also, stronger than expected housing starts/building permits data for May drove-out investors from safe-haven buying. The yield on the benchmark 10-year Treasury note rose 5-1/2 basis points to 1.673 percent and the yield on short-term 2-year Treasury note also jumped more than 3 basis point to 0.733 percent by 11:00 GMT.
Russian bonds rallied as the ruble was bolstered by a rebound in crude oil prices, pushing the yield on 10-year bonds down 5 basis points. The benchmark 10-year bonds yield fell 5 basis points to 8.650 percent, yield on super-long 20-year bonds tumbled 17 basis points to 8.820 percent and 2-year bonds yield dipped 10 basis points to 9.390 percent by 10:40 GMT.
The UK gilts continue to trade lower as recent polls suggested that ‘Remain’ camp is ahead in the run-up to the EU referendum against ‘Leave’. 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 8 basis points to 1.226 percent, yield on super-long 40-year bonds also jumped nearly 8 basis points to 1.879 percent and the yield on short-term 2-year note climbed nearly 7 basis points to 0.459 percent by 10:00 GMT.
German bunds slumped as the chances of Britain leaving the EU were seen receding after the latest polls by various corporate bodies in the United Kingdom in run up to the June 23 Brexit referendum indicated that the percentage of citizens in favor of "Remian" has gained a narrow lead against those who want to "Leave". Also, 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 4 basis points to 0.057 percent, yield on super-long 30-year bonds jumped 6 basis points to 0.637 percent and the yield on short-term 2-year note climbed 2-1/2 basis point to -0.577 percent by 09:00 GMT.
Japanese long-term bonds plunged as risk appetites were strengthened after the latest polls showed that the ‘Remain’ camp gained a narrow lead. Also, rallying crude oil prices and firm equities drove-out investors from buying safe-haven assets. The yield on the benchmark 10-year bonds hovered around -1.14 percent mark, yield on super-long 40-year bonds jumped more than 4 basis points to 0.309 percent, yield on 15-year bonds climbed 1 basis point to 0.023 percent and the 30-year JGB yield bounded more than 3 basis point to 0.268 percent by 06:45 GMT.
Australian government bonds slumped Monday with market sentiments remaining stronger as Brexit campaigning was suspended after the killing of a UK politician Jo Cox. Also, rallying crude oil prices and firm equities discouraged investors from safe-haven buying. The yield on the benchmark 10-year Treasury note rose 5-1/2 basis points to 2.151 percent and the yield on short-term 2-year note jumped 1-1/2 basis points to 1.644 percent by 05:20 GMT.
New Zealand government bonds closed higher as campaigning over whether Britain should remain in the European Union was suspended after the killing of a UK politician Jo Cox last Thursday. The yield on the benchmark 10-year bonds rose 2-1/2 basis point to 2.515 percent.
