Overnight Events
• GBP/USD 1.73%, EUR/USD 0.45%, USD/JPY 0.3%
• DXY 0.001%, DXY 3.13%, Brent 1.4%, Iron 0.8%
• UK William Hill 5/2 for Brexit, 3/1 for remain
• Sunday Times and Sunday Telegraph advocated Brits vote to leave
• Mail on Sunday says Brits should vote to remain in EU
• Implied probability of a remain vote 72% vs 65% Friday-Betfair odds
• DE May Producer Prices 0.4% m/m vs 0.1% prev, 0.3% exp
• DE May Producer Prices -2.7% y/y vs -3.1% prev, -2.8% exp
• BoJ Kuroda: Hard to lay out tools for contingencies in advance - Rtrs
• Kuroda: Decline in potential growth rate likely to exert downward on econ - Rtrs
• Kuroda: Positve impact on econ from NIR is already starting to be seen - Rtrs
• Kuroda: Direct impact of NIR on profitability of Jpn banks really limited - Rtrs
• IMF: Japan needs bold reforms to spark economic revival - Rtrs
• SNB-Total and domestic sight deposits increase in latest week
• Three of six UK opinion polls show shift towards “remain” – Reuters FACTBOX
• EU banking watchdog to leave London in case of Brexit – Rtrs
• Germany FinMin - German econ had good Q2 start, upswing to continue –Rtrs
• BoJ holds more than a third of all JGBs – Nikkei
• PBOC established direct FX trading between CNY, ZAR – Rtrs
• Nigeria CB removed fixed exchange rate peg-NGN loses indicated 28%
Currency Summaries
EUR/USD
• Choppy crosses adding to the EUR volatility but gains seen fragile
• Hearing bids sat 1.1330-1.1335 and hourly action shows minor base
• Short squeeze to 1.1383 early Europe found profit taking but said light
• Sterling the main driver and feed through to a broadly easier USD
• Bund yields higher early but now losing ground with U.S yields
• Chart:https://reut.rs/28ImLDp
USD/JPY
• USD/JPY static seeing a narrow 104.30-104.85 range
• Focus on pivot point which comes in @104.34
• Japanese exporter, other offers trail up from 105.00
• In early Asia USD/JPY got a boost on UK "remain" polls and Gotobi demand
• Risk tentatively on as Nikkei Index closed 2.34%
• EUR/JPY range has been 117.78-119.12
EUR/CHF
• Volatility playing out ahead of UK EU referendum Thursday
• EUR/CHF uncharacteristically big ranges since June 3 U.S payroll day
• Monday range: 1.0850-1.0910 and mid-range into New York
• Thurs Long Legged Doji pointed mkt indecision and cross reversed higher
• Extension to 1.0910 but soon lost traction and bears back in the game
• SNB sight depo numbers suggest heavier FX activity in latest week
• Below 1.0850 and bear run to resume: Chart: https://reut.rs/28IeqU7
GBP/USD
• GBP/USD extended north to 1.4673 during European am amid remain vote hopes
• Cable rose from 1.4390 to 1.4625 in Asia on weekend polls showing remain momentum
• 1.4686 (200DMA) is a resistance level. Referendum Thursday (polls close 5pm ET that day)
• EUR/GBP fell to a European am low of 0.7732 amid remain vote hopes
• 0.7720/21 (June 2/3 low) & 0.7692 (1.30 GBP/EUR) are support levels
USD/CAD
• USD/CAD fell to European am 1wk low of 1.2811 courtesy of a rise in risk appetite
• Rise in risk appetite influenced by hopes Britain will vote to remain in EU
• 1.2830 was Friday’s low. 1.2832-1.2878 was Asia range
AUD/USD
• AUD/USD tripped stops above 0.7453 en route to European am high of 0.7472
• 0.7453 was Asia high. Gains fuelled by rise in risk appetite on lower Brexit fears
NZD/USD
• NZD/USD is buoyant on the back of a rise in risk appetite on lower Brexit fears
• 0.7127 = European am high. 0.7148 was 12mth peak after unchanged RBNZ June 9
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)
• GBP gains as Brexit odds lengthen, risk improves, G10 vols hit
• Liquidity poor, especially GBP – vols gap lower, limited volumes
• 1wk cable 40 from 53.0 Friday, EUR/GBP 1wk 35.0 from 48.0
• 1mth Cable 21.5 vs 25.0 Friday. EUR/GBP 1mth 19.5 vs 24.0 Friday
• EUR/USD 1mth 9.5-13.6 last week, settles 10.5 now
• USD/JPY 1mth now 12.5 vs post BoJ high at 14.5 (11.5 the week prior)
Economic Data – (Source:Bloomberg)