Overnight Events
• USD/JPY -1.65%, GBP/JPY -2.0%, EUR/JPY -1.9%, CHF/JPY -1.8%
• UK May R.Sales 6.0% y/y vs rvsd 5.2% prev, 3.9% exp-Biggest rise since Sept
• EZ May final infl. -0.1% y/y vs -0.1% prev, -0.1% exp
• IPSOS MORI CEO –Leave campaign outgun remain with immigration argument
• MORI poll 51% leave, 49% remain, Paddy Power 11/8 leave, 4/7 remain
• BoJ Policy Board leaves policy unchanged
• BoJ vote 8-1 for money base target, 7-2 for NIRP
• Kuroda sticks script on NIRP, QQE & prices. Points to problems with yen rise
• Kuroda: Current yen rise could have undesirable impact on prices, Japan econ - RTRS
• Japan ChiefCabSec Suga – Recent FX moves rapid
• Japan Suga Fx speculative, undesirable, will take steps if needed – Rtrs
• Brexit seen lifting yen with risk-off mood, narrower rate spread – Nikkei
• Japan’s megabanks step away from JGBs – Nikkei
• Credit downgrade may be positive for Japan’s 10 trln bond market – Rtrs
• SNB left rates unchanged and continues to warn of CHF intervention
• SNB’s Jordan-Intervention only makes sense if has chance of impact
• SNB’s Maechler-SNB has full team following Brexit on 24-hour basis
• Brexit helped keep Fed on hold, could slow future US rate rises-RTrs
• Divided Wall Street sees just one Fed rate hike in ’16 – Rtrs
• G.Sachs – GBP could fall 11%, EUR 4%, JPY could rise 14%, CHF 8% on Brexit - Rtrs
Currency Summaries
EUR/USD
• EUR/USD 1.1257-95 in Asia then lower in Europe to 1.1230
• EUR/JPY selling at heart of flows after USD/JPY plummet in Asia
• Stronger JPY has stoked risk averse sentiment linked to UK referendum
• EUR/JPY pinned to lows despite small USD/JPY bounce
• EUR/USD likely sees more ranges near 1.12/13. 100-DMA/cloud base underpin
• Chart: https://reut.rs/1XqOqx6
• EUR 3.5bln option expiries 1.1250-00 should cap but potential magnets
USD/JPY
• USD/JPY dove as BoJ held, took out large 105.00 barriers
• USD/JPY high in Asia was 106.02
• Fell but found support below @103.56 in Europe
• Intra-day recovery seen as corrective, mainly short covering
• Talk Tokyo names were buyers near the low
• Stops said to be above 104.60, 104.80. Recovery high has been 104.41
• Supply likely @104.48 & 104.95 pivot points
• EUR/JPY has fallen from 119.41 to 116.94
EUR/CHF
• No surprises from the SNB's continued warnings over intervention
• EUR/CHF in the spot light having fallen 3% since May 20 1.1128 high
• Despite established CB stance EUR climbed to 1.0836 vs 1.0808 early low
• Offer soon returned and cross 1.0810 into New York
• Potential turbulence for the CHF over the UK EU vote heightens SNB vigil
• FX intervention tool of choice, infl. profile raised and highlights Brexit risk
• EUR/CHF 1.08-1.0860 and squeeze risk: Chart: https://reut.rs/25Ze7Kz
GBP/USD
• GBP/USD fell to 1.4125 after 4am ET Ipsos MORI poll showed big swing to Brexit
• Cable then rallied thru 4.30am ET release of strong UK May retail sales data
• 1.4195 was cable high shortly after the data was officially released
• EUR/GBP rose to eye 0.80 shortly before European equities fell 1% from 3am ET open
• Ensuing losses influenced by European equities paring losses & UK retail sales data
USD/CAD
• USD/CAD has risen to threaten 1.30 under the influence of softer oil prices
• WTI plumbed a 1mth low of $47.22/barrel during the European am
• Half-yard 1.30 expiry Friday. BoC forecasts flat/slightly negative Canada GDP in Q2
AUD/USD
• AUD/USD fell to 0.7345 early Europe amid AUD/JPY losses/risk aversion
• 0.7345 = 100 pips below 0.7445 Asia peak (scaled after Oz jobs data)
NZD/USD
• NZD/USD elicited early Europe support at 0.7035 after retreating from 0.7095
• 0.7095 = Asia high after NZ Q1 GDP beat. 0.7035 & 0.71 option expiries Friday
• AUD/NZD plumbed a 6-day low of 1.0424 early Europe. 1.0410 = recent 13mth low
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)
• Vols off their risk averse/pre Brexit rally highs yesterday
• Mild support coming in again today as Brexit continues to factor
• Bid/Offers spreads still high and wide – especially in GBP pairs
• 1wk rolls over Brexit tomorrow – 1wk Cable expected around 50 vols
• USD/JPY 1mth risk reversals highest downside bias in 6 years now
• AUD/USD 1mth risk rev 3yr high AUD puts. EUR/USD 2bln 1.1250 expiry