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    US FX Market Open – Wednesday, June 1, 2016: STERLING CONTINUES TO SUFFER ON BREXIT FEARS

     

     

     

    Overnight Events

    • Japan PM Abe postpones sales tax hike until Oct 2019 – RTRS
    • BoJ Gov Kuroda – Important for Japan to aim for budget surplus by FY 20 - Hokkaido Shimbun
    • Japan May mfg PMI 47.7, flash 47.6, April 48.2, new orders 44.7, flash 44.1
    • Japan MoF survey – Q1 CAPEX 4.2% y/y
    • China May Caixin mfg PMI 49.2, 49.3 eyed, April 49.4, 15th contraction month
    • China push in international bonds to support weakening renminbi - FT
    • Fonterra dairy auction result due circa 1400GMT. Modest GDT price rise expected
    • Euro Zone May Markit Mfg final PMI 51.5 vs 51.5 prev, 51.5 exp
    • German May Markit/BME Mfg PMI 52.1 vs 52.4 prev, 52.4 exp
    • 41% of Brits want to remain in EU, 41% want to leave – YouGov poll for The Times
    • Paddy Power-5/2 Britain votes to leave EU, 1/3 Britain votes to remain
    • UK May Markit Mfg PMI 50.1 vs 49.2 prev, 49.6 exp
    • Swiss Q1 GDP slightly below f/c at 0.1% q/q and 0.7% y/y
    • Swiss Retail sales remain weak: April sales -1.9% y/y, March rvsd lower to -1.6%
    • Swiss May PMI beats at 55.8 vs f/c 54.0 on gains in orders, prices
    • Norway’s PM says weak NOK and spending help economy – RTRS

    Currency Summaries

    EUR/USD  
    • 1.1114-36 in Asia, 1.1163 London. Firmer EUR/GBP, weaker EUR/JPY contain
    • 10DMA 1.1168, Tues’ 1.1173 high, 100DMA 1.1178 resistance
    • Cloud also weighs 1.1143-1.1306. Support Mon's 1.1097 low/200DMA 1.1096
    • DXY mid/lower 95.50’s vs 95.89 close Tues’, high since 28 Mar at 95.968 Fri’
    • Vols propped – 1wk 10.3 (125 pips) in to NFP, Yellen. 1mth FED/Brxt 10.0
    • Not much priced for ECB – 78 pips. 1.7bln 1.1100 expiry Thursday

    USD/JPY
    • PM Abe announces delay in sale tax hike, reacts to news by buying yen
    • USD/JPY offers placed ahead of 111.00, topped out @110.83 in Asia
    • Dropped to new session low of 109.50
    • Nikkei closed down 1.62%
    • USD/JPY 48H log correlation with Nikkei futures ( 78)
    • EUR/JPY range has been 122.00-123.30

    EUR/CHF
    • EUR/CHF higher after rebound from 1.1030 low Tues, SNB may be helping
    • USD/CHF stalls beneath parity, set to test recent 0.9887/73 lows
    • CHF stronger with JPY for 2nd day, GBP/CHF leads way, as equities tilt lower

    GBP/USD   
    • GBP/USD plumbed 2wk low of 1.4439 during European am amid Brexit fears
    • YouGov online poll for The Times suggests Brexit vote in balance
    • GBP hit hard by ICM Brexit phone poll shock Tuesday: poll said leave 3 points ahead
    • EUR/GBP scaled an 8-day peak of 0.7728 during European am amid Brexit fears
    • Paddy Power quotes 5/2 for Brexit vs 9/2 a week ago. Remain 1/3 vs 1/8 a week ago

    USD/CAD
    • USD/CAD met headwind circa 1.31 during European am after rising on lower oil prices
    • WTI $48.35/barrel at 6.15am ET, 75 cents lower on day. OPEC meeting Thursday
    • Large 1.3100 option expiry for NY cut, $1.1bn strike. 1.3053 was Asia low
    • Another large 1.3100 option expiry Thursday, $777mn strike

    AUD/USD     
    • AUD/USD 0.7300 offers helped curtail Asia gains after Oz GDP data beat
    • 0.7250 = European am low. Large 0.7240 option expiry Thursday, A$1.5bn strike
    • RBA seen on hold next week (June 7) after 25bp cut in May

    NZD/USD
    • NZD/USD met fresh headwind at 0.6815 during the European am
    • Profit-taking on longs helped cap NZD/USD gains at 0.6815 in Asia
    • 0.6774 = interim low. Asia gains influenced by NZ Q1 terms of trade rise
    • More offers expected pre-0.6850. Fonterra dairy auction result due circa 10am ET

    Today’s events

    An expiring FX option heading into the New York Cut, if close enough to the strike price, can act as a magnet for selling/buying.  If the option is large, it can generate enough trading to move the market.  

    Option Expirations (Source:ThompsonReuters)

    • Risk aversion and impending event risk lending bid tone to vols
    • ECB Thurs, NFP Fri, Yellen speech Monday. FED, BOJ, Brexit
    • Brexit poll boost Tues’- GBP/USD 1mth 20.0 from 17.0, 1mth RR 6.2 vs 5.5
    • 1mth EUR/USD to 10.0 from 9.4 Tues, 1mth RR 1.45 vs 1.05 EUR puts
    • USD/JPY – 1wk up 1.0 to 12.25, 1mth 12.4 from 11.5 Tues, 10.8 Friday

    Economic Data(Source:Bloomberg)


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