Swissquote - Analytics

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    RBNZ sounds less dovish

    Market Brief

    G10 Advancers and Decliners vs USD
    NZD 1.75
    JPY 0.22
    GPB 0.09
    CAD 0.08
    CHF 0.05
    SEK 0.02
    EUR 0.02
    DKK 0.01
    NOK 0.01
    AUD -0.03
    Global Indexes Current Level % Change
    Nikkei 225 Index 16668.41 -0.96
    Hang Seng Index 21297.88 0
    Shanghai Index 2927.16 0
    FTSE futures 6274.99 -0.29
    DAX futures 10170 -0.34
    SMI Futures 8118 -0.12
    S&P future 2114 -0.19
    Global Indexes Current Level % Change
    Gold 1260.37 -0.16
    Silver 17.11 0.41
    VIX 14.08 0.21
    Crude wti 51.5 0.52
    USD Index 93.53 -0.05

    Trading activity was thin in the Asian session as China celebrates the Dragon Boat Festival. The rest of Asia’s regional equity indices were marginally weaker. Volatility in currency markets completely disappeared with the lone exception of NZD. NZDUSD rallied to 0.7148 from 0.7009 as the RNBZ held its official cash rate at 2.25% but traders interpreted the communication as less dovish. The Bank of Korea (BoK) surprisingly cut its benchmark rate 25bp, to 1.25%, as BoK Governor Lee Ju Yeol, noting risk in downside growth, prompted this preemptive action. Despite Korea’s decent acceleration in GDP, the accompanying press conference and policy statement indicate more room for easing. Commodities firmed, led by oil and metals as speculation that the Fed will delay interest rate hikes until the fall increased. Brent crude rose to $52.86 while copper increased to 208.15. We continue to expect to see a cyclical deceleration in US economic data, forcing Fed rate expectations down, and triggering a broad based risk rally (barring a Brexit). European interest rate yields continue to decline as expectations for a Brexit are on the rise (falling bond yields are also pushing speculators into risky assets). GBPUSD bulls are finding no respite from Brexit worries at the pairs lingers above 1.4499 100d MA.

    Yesterday, US JOLTS job opening reported a rise in job openings. Total job openings increased to 5.788mn in April from 5.67mn in the prior month, a record high. Puzzlingly, last week’s labor report suggested a slowdown in hiring while JOLT data indicated that the number of job openings have increased. On the surface this could indicate that tightness in participation is now reducing hiring. This would lead to an acceleration of wage growth as companies increase offers to entice candidates (as reported in Beige Book).

    USDJPY remains constrained in the 106.52-107.09 range. In Japan machinery orders stayed weak as cored orders decreased 11.0 m/m in May form 5.5% in April. The Cabinet office attempted to put a positive spin on the concerning result by saying “recovery movements” can be seen, however, this was deep decline. The weak read suggests a negative spillover in Capex has increased as well as the likelihood that the BoJ will act in July. Given the balanced risks on the JPY we expect further consolidation in trading ranges. In China, higher lower food prices pushed CPI May inflation downs to 2.0%, while PPI deflation eased further to -2.8% y/y. The fall in pressure suggests that Chinese inflation forecasts should be revised lower.

    On the calendar today trade will see UK Trade balance, US wholesale inventories and Canadian capacity utilization.

    Swissquote Sqore Trade Ideas: https://en.swissquote.com/fx/news/sqore

     


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