Market Roundup
- Sterling marked down again and yen safety drives GBP/JPY sharply lower
- GBP/JPY falls nearly 2.0% to 149.50, EUR/GBP hits 0.7986, a high since Apr
- GBP/USD -0.85%, USD/JPY -1.01%, EUR/USD +0.06%
- DXY -0.17%, DAX -1.3%, Brent -0.8%, Iron +1.5%, Copper +0.55%
- YouGov/Sunday Times poll – 42% to vote “remain”, 43% “leave”
- Opinium/Observer poll – 44% would vote “remain”, 42% “leave”
- William Hill and Paddy Power Brexit odds 7/4 Paddy Power
- UK 10-year gilt yield plumbed new record low of 1.212% early Europe
- EU’s Tusk says Brexit could threaten western political civilisation- Bild
- SNB domestic sight depos fall in latest week by CHF2.6 bln
- Japan ChiefCabSec Suga – Eyeing very volatile moves in Japanese stocks
- Fitch affirms Japan at “A” and outlook revised to negative
- Abenomics doubts drive foreigners off Japan stocks, volatility spikes
- Angry banks complicate BoJ’s ability to deepen negative rates
- China Stats Bureau – Downward pressures still, working to achieve targets
- China May industrial output +6.0% y/y, +5.9% eyed
Economic Data Preview
No major economic releases scheduled
Key Events Ahead
No significant event scheduled
FX Beat
USD: The dollar index, against a basket of currencies edged down to 94.53 after touching a high of 94.75 earlier in the session.
EUR/USD: The euro rose 0.2 percent to 1.1271, hovering away from a low of 1.1232 struck earlier in the session. The major gained as markets remained cautious over worries that Britain could vote to leave the European Union in a referendum next week and also in run-up to this week's key central bank meetings. On the higher side resistance is around 1.1290 (200 HMA) and any violation above will take the pair to next immediate resistance 1.134500/1.1400 in the short term. The support is at 1.1220 and break below targets 1.11670/1.11500/1.1100.
UDS/JPY: The perceived safe-haven yen gained across the board, hitting a 3-year high against both the euro and sterling, on worries that Britain could vote to leave the European Union in a referendum next week. It surged by over 1 percent to trade at 119.64 yen per euro, its strongest since February 2013, while against sterling, the yen rose more than 1 percent to 150.46 yen, it’s strongest since August 2013. The greenback slumped to a 6-week low of 105.73 and was last trading 0.7 percent lower at 106.11 yen. The short term trend is weak as long as resistance 108 holds. The major resistance is around 108 and any break above confirms minor trend reversal, a jump till 109/109.55. On the lower side minor support is around 105.80 (200 WMA) and any close below 105.80 will drag the pair till 105/103.90.
GBP/USD: Sterling slumped to an 8-week low as betting markets have reduced the chances of the country remaining in the European Union after some recent polls showed the "Leave" camp ahead, creating anxiety amongst investors. According to Betfair, the implied probability of a referendum vote to stay dropped to 64 percent, down around 14 percentage points from last week. Sterling trades 0.5 percent lower at 1.4176, after falling as low as 1.4115, a level last seen on April 14. Against the euro, the pound trades 0.7 percent lower at 79.47 pence, having touched a low of 78.85 earlier in the session. The short term trend is weak as long as resistance 1.4280 holds. Any break above 1.4280 will take the pair till 1.4330/1.4380/1.4400. The minor resistance is around 1.4225/1.4250. On the lower side any break below 1.4100 will drag it till 1.4045/1.4000.
USD/CHF: The Swiss franc declined against the dollar, reversing its previous session gains. The greenback rose 0.1 percent to 0.9657, hovering towards sessions high of 0.9663 and away from a low of 0.9578 struck on Thursday. The major support is around 0.9580 and any break below 0.9580 will drag the pair down till 0.9540/0.9500 in the short –term. On the higher side any break above 0.9660 will take it till 0.9695/0.9745. Overall bearish invalidation is only above 0.9960.
AUD/USD: The Australian dollar was firm as investors were unwilling to take major positions ahead of central bank meetings this week and Brexit worries. The Aussie was trading 0.4 percent higher at 0.7402, drifting away from a low of 0.7359 struck earlier in the session. It faces strong support at 0.7340 (daily Tenken-Sen) and any break below confirms minor trend reversal. On the higher side, resistance is located at 0.7440 and any break above major resistance will take the pair till 0.7480/0.7515. The major support is around 0.7340 and break below will drag it till 0.73200/0.7260.
NZD/USD: The New Zealand dollar gained 0.4 percent to 0.7077 after declining as low as 0.7031 earlier in the session. The kiwi attempted a recovery from a 3-day low on the back of a rally in the copper prices. Immediate resistance is seen at 0.7122 (Friday High), break above targets 0.7150. On the lower side, support is located at 0.7031 (Session Low), break below could take the pair lower 0.7000 level.
Equities Recap
European shares traded sharply lower as investors remained cautious on worries that Britain could vote to leave the European Union in a referendum next week and on weak global investment outlook.
Europe's FTSEurofirst 300 declined 1.5 pct, Germany's DAX lost 1.2 pct, France's CAC 40 slipped 1.3 percent and Britain's FTSE 100 dropped 0.7 pct.
Tokyo's Nikkei shed 3.51 pct at 16,019.18 and MSCI's broadest index of Asia-Pacific shares outside Japan lost 1.6 percent.
Shanghai composite index slumped 3.2 pct to 2,833.07 points, while CSI300 index declined 3.1 pct at 3,066.34 points. Hong Kong’s Hang Seng index closes down 2.5 pct at 20,512.99 points.
Commodities Recap
Oil prices declined, weighed down by weak economic prospects in Europe and Asia and a related strengthening in the U.S. dollar, which makes fuel imports for countries using other currencies more expensive. Brent crude oil futures dropped to $49.97 per barrel, at 1101 GMT, having touched a low of $49.78 per barrel. U.S. crude was down 61 cents at $48.46 a barrel.
Gold touched a near 4-week high, aided by weaker stocks as investors rushed towards safe haven-assets ahead of this week's central bank meetings and Britain's June 23 referendum. Spot gold rose 0.9 percent to $1,285.74 an ounce by 1104 GMT, its highest since May 16. U.S. gold was up 0.1 percent at $1,276.50.
Treasuries Recap
The US Treasuries saw further gains across the curve, coming alongside downward pressure in equities, majorly stemming from Brexit concerns. On Friday, the 2-year yield saw downward pressure on the session, pushing below 0.75 percent, alongside a greater decrease in the 10-year yield, marching lower below 1.65 percent mark. Markets now look ahead to a greater flow of data this week, highlighted by PPI, CPI, Empire manufacturing, Philadelphia manufacturing and housing starts/building permits releases. However, the key focus for the week will be the June FOMC statement on Wednesday, accompanied by updated economic projections and a post-statement press conference from Fed Chair Yellen. Meanwhile, the yield on the benchmark 10-year Treasury note fell 1 basis points to 1.628 percent and the yield on short-term 2-year Treasury note dipped 1-1/2 basis point to 0.722 percent by 11:15 GMT.
UK 10Y gilt yield slides to all-time low of 1.20 pct as recent polls showed the outcome of the referendum is too close to call, raising the possibility that Britain might leave the EU after 43 years of membership in the bloc. Meanwhile, the yield on the benchmark 10-year gilts fell nearly 3 basis points to all-time low of 1.206 percent by 10:00 GMT.
German 10-year bund yields continue to hover at record low on Monday, after testing its 2015 low of 0.05 percent last week, are likely to test zero soon as investors remained cautious ahead of the Federal Reserve meeting and Britain’s referendum. Also, weak crude oil prices shifted investors’ interest towards fixed income securities. Meanwhile, the yield on the benchmark 10-year bonds fell 1/2 basis points to 0.016 percent by 09:25 GMT.
The benchmark 10-year JGB hit a fresh all-time low of minus 0.158 percent on Monday, following global debt prices as investors remain uncertain about the global economic outlook and the near-term path of BoJ and US interest rates. Also, UK decision on whether to remain in the European Union on June 23 is also weighing on investors’ minds. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 1 basis points to -0.158 percent, yield on super-long 40-year bonds nearly dipped 2-1/2 basis point to 0.290 percent, yield on 15-year bonds nearly tumbled 1 basis point to 0.003 percent (likely to dip below zero soon) and the yield on short-term 2-year bonds hovered around -0.270 percent mark by 05:40 GMT.
New Zealand government bonds started this week on a weaker note as investors wary ahead of potentially seismic events this month including Britain’s referendum on European Union membership, Bank of Japan and the Federal Reserve meeting. Also, weak crude oil prices shifted investors towards safe-haven assets. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 1 basis point to 2.530 percent and the yield on short-term 2-year bonds also dipped 1 basis point to 2.115 percent.
