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Asia Roundup: Antipodeans ease as Chinese trade surplus misses expectations, euro at 3-week highs as ECB seen tapering stimulus, Asian shares off 2-1/2 month peak - Friday, June 8th, 2018

Market Roundup

  • G7 leaders set to clash with combative Trump over tariffs, trade
     
  • Revised data shows Japan's economy still at risk of recession
     
  • Japan, U.S. to seek first trade talks under new framework in July
     
  • Trump dangles prospect of North Korean leader visit if summit successful
     
  • UK's May to argue for 'freer and fairer' trade at G7 meeting
     
  • POLL-BoE to raise rates in August so long as economy over its slump
     
  • POLL-Economists stick to view ECB will end QE this year
     
  • U.S. expands China health alert amid illness reports
     
  • China May Trade Balance (USD), 24.92 bln, f'cast 31.90 bln, last 28.78 bln, rvsd 28.38 bln
     
  • China May Exports YY, 12.6%, f'cast 10.0%, last 12.9%, rvsd 12.7%
     
  • China May Imports YY, 26.0%, f'cast 18.7%, last 21.5%
     
  • U.S. money market funds see biggest inflows in nearly 5 years -Lipper
     
  • Foreign CB US debt holdings +$3.864 bln to $3.398 tln June 6 week
     
  • Treasuries +$2.626 bln to $3.035 tln, agencies +$1.388 bln to $287.986 bln

Economic Data Ahead

  • (0200 ET/0600 GMT) Germany Apr Industrial Output MM, f'cast 0.3%, last 1.0%
     
  • (0200 ET/0600 GMT) Germany Apr Exports MM SA, f'cast -0.15%, last 1.70%
     
  • (0200 ET/0600 GMT) Germany Apr Trade Balance, EUR, SA, f'cast 21.0 bln, last 22.0 bln
     
  • (0245 ET/0645 GMT) France Apr Industrial Output MM, f'cast 0.3%, last -0.4%

Key Events Ahead

  • (0315 ET/0715 GMT) ECB's Yves Mersch speaks at International Risk Management Conference 2018 - Paris

FX Beat

DXY: The dollar index eased, extending losses for the fifth straight session, amid souring trade relations ahead of a major meeting of global leaders. The greenback against a basket of currencies trades 0.05 percent down at 93.40, having touched a low of 93.21 the day before, its lowest since May 17. FxWirePro's Hourly Dollar Strength Index stood at -61.28 (Bearish) by 0500 GMT.

EUR/USD: The euro steadied after rising to a 3-week peak in the previous session on expectations that the European Central Bank would begin unwinding its stimulus programme and easing Italian political concerns. The European currency traded flat at 1.1798, having touched a high of 1.1839 the day before, its highest since May 16. FxWirePro's Hourly Euro Strength Index stood at 69.91 (Bullish) by 0400 GMT. Investors’ attention will remain on ECB Mersch's speech, ahead of U.S. wholesale inventories data. Immediate resistance is located at 1.1839 (Jun. 7 High), a break above targets 1.1896 (May 5 High). On the downside, support is seen at 1.1729 (5-DMA), a break below could drag it till 1.1681 (10-DMA).

USD/JPY: The dollar held firm near previous day's lows, as risk appetite soured on bets that Europe's massive monetary stimulus was nearing an end. Moreover, uncertainty over trade relations ahead of a key meeting of global leaders continued to hurt investor sentiment. The major was trading 0.05 percent down at 109.66, having hit a high of 110.26 on Wednesday, its highest since May 23. FxWirePro's Hourly Yen Strength Index stood at 63.76 (Bullish) by 0400 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. wholesale inventories data. Immediate resistance is located at 110.28, a break above targets 110.85 (May 17 Low). On the downside, support is seen at 109.41 (10-DMA), a break below could take it lower 108.95 (May 24 Low).

GBP/USD: Sterling steadied above the 1.3400 handle amid concerns about Brexit negotiations as Prime Minister Theresa May struggled to get her own cabinet to agree on a plan to prevent a hard border on the island of Ireland if Brexit talks fail. The major traded 0.05 percent up at 1.3424, having hit a high of 1.3471 on Thursday, it’s highest since May 22. FxWirePro's Hourly Sterling Strength Index stood at 5.60 (Neutral) by 0500 GMT.  Investors’ attention will remain on the UK consumer inflation expectations, ahead of U.S. fundamental drivers. Immediate resistance is located at 1.3483 (May 21 High), a break above could take it near 1.3527 (May 18 High). On the downside, support is seen at 1.3378 (5-DMA), a break below targets 1.3305 (May 23 Low). Against the euro, the pound was trading 0.05 percent down at 87.92 pence, having hit a low of 88.37 pence, it’s highest since May 7.

AUD/USD: The Australian dollar fell to a 3-day low after data showed Chinese trade surplus balance widened less-than-expected in the month of May. China posted a trade surplus of $24.92 billion, below the forecast of $31.9 billion increase in May from $28.38 billion in April. The Aussie trades 0.2 percent down at 0.7611, having hit a high of 0.7676 on Wednesday; it’s highest since Apr. 23. FxWirePro's Hourly Aussie Strength Index stood at -120.18 (Highly Bearish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7586 (10-DMA), a break below targets 0.7552 (May 31 Low). On the upside, resistance is located at 0.7682 (Apr 23 High), a break above could take it near 0.7711 (Apr. 9 High).

NZD/USD: The New Zealand dollar slightly edged down as investors’ attention shifted on the upcoming G7 summit that promises exposed tensions. The Kiwi trades flat at 0.7025, having touched a high of 0.7060 on Wednesday, its highest level since Apr. 30. FxWirePro's Hourly Kiwi Strength Index was at 3.90 (Neutral) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7089, a break above could take it near 0.7120. On the downside, support is seen at 0.6997 (June 5 Low), a break below could drag it below 0.6962.

Equities Recap

Asian shares retreated from a 2-1/2-month high as investors' risk appetite weakened on uncertainty over trade relations ahead of a key meeting of global leaders.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.5 percent.

Tokyo's Nikkei declined 0.4 percent to 22,737.10 points, Australia's S&P/ASX 200 index slumped 0.1 percent to 6,054.00 points, and South Korea's KOSPI advanced 0.6 percent to 2,455.06 points.

Shanghai composite index fell 1.3 percent to 3,068.19 points, while CSI300 index was trading 1.4 percent down at 3,777.48 points.

Hong Kong’s Hang Seng was trading 1.4 percent lower at 31,079.32 points. Taiwan shares shed 0.9 percent to 11,156.42 points.

Commodities Recap

Crude oil prices declined, weighed down by surging U.S. crude output, however, Venezuela's struggle to meet its supply obligations and ongoing output cuts led by producer cartel OPEC limited downside. International benchmark Brent crude was trading 0.1 percent down at $77.22 per barrel by 0412 GMT, having hit a low of $73.80 on Tuesday, its lowest since May 8. U.S. West Texas Intermediate was trading 0.05 percent up at $65.01 a barrel, after falling as low as $64.26 on Tuesday, its lowest since Apr. 10.

Gold prices continued to consolidate within narrow ranges, as investors remained cautious ahead of crucial events next week such as a U.S. Federal Reserve policy meeting and a summit between the United States and North Korea. Spot gold was trading flat at $1,296.35 per ounce at 0415 GMT, having hit a high of $1,302.97 the prior day, its highest price level since May 31 and was set for a 0.3 percent so far this week. U.S. gold futures for August delivery fell 0.2 percent to $1,301.10 per ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2940 percent higher by 0.022 bps, while 5-year yield was 0.022 bps up at 2782 percent.

The Japanese government bonds gained slightly during late Asian session after the country’s first quarter 2018 final gross domestic product (GDP) data, released early today disappointed market participants, also remaining unchanged from the preliminary reading. The yield on the benchmark 10-year JGB note, which moves inversely to its price, remained tad lower at 0.04 percent, the yield on the long-term 30-year note slid 1/2 basis point to 0.71 percent and the yield on short-term 2-year hovered around -0.12 percent.

The Australian government bonds jumped on the last trading day of the week as investors covered previous short positions ahead of the long weekend in the country, with markets being closed on Monday on account of Queen’s Birthday. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, jumped nearly 3-1/2 basis points to 2.80 percent, the yield on the long-term 30-year Note also surged 3-1/2 basis points to 3.33 percent and the yield on short-term 2-year traded 2 basis points lower at 2.08 percent.

The Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year rose 6 Canadian cents to yield 1.909 percent and the 10-year climbed 21 Canadian cents to yield 2.284 percent. The 10-year yield touched its highest intraday since May 25 at 2.340 percent.

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