It’s been a crazy day for financial markets. Surprisingly, in the first part of the day USD significantly strengthened despite of dovish changes in FOMC’s dot-chart and cautious statement. Moreover, Brexit fears has driven the market sentiment and rumors saying that the Brexit vote could be delayed because of the murder of UK MP Jo Cox today switched off risk aversion.
PM David Cameron said in Gibraltar that: “It is right that we are suspending campaigning activity in this referendum and everyone’s thoughts will be with Jo’s family and her constituents at this terrible time". The ’remain’ campaign now says that activities will remain suspended on Friday. The murder sparked lots of rumors saying that referendum might be delayed which helped GBP and EUR to rebound. USD and gold prices was traded lower in the aftermath.
In the afternoon we had a package of the US data. Three things deserve particular attention but are unlikely to make markets see higher probability of rate hikes by Fed in near future. CPI was down from 1.1 to 1% YoY while it was expected to maintain the previous level, but on the other hand the core measure went up by a notch, to 2.2% YoY as was expected. And there is high correlation of CPI core and the PCE core - the Fed’s inflation indicator of choice.
We had also plenty events with central banks. The Bank of England didn’t change interest rates as market had expected. Brexit dominated the tone and the message of the bank. and shows a huge uncertainty connected with the event. The pound is on daily lows as another poll showed "leave" campaign ahead.
Bank of Japan maintained current monetary policy, abstaining from adding any monetary stimulus which caused huge gains on the yen. Japan’s currency has gained against all major currencies after BoJ members said that they prefer to wait and continue to measure an economic impact of their latest cut of interest rate to negative territory and ahead of election in the upper chamber next month. It spurred Yen’s appreciation which is the strongest currency amid G10.
Looking ahead we have release of BusinessNZ Manufacturing PMI today at 23:30.
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