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Pound Gains After Latest Brexit Poll, US Dollar Eyeing PCE Data

Pound Gains After Latest Brexit Poll, US Dollar Eyeing PCE Data

Talking Points:

A recovery in risk appetite bolstered the sentiment-linked commodity-bloc currencies in overnight trade, with the Australian, Canadian and New Zealand Dollars tracking regional share prices and S&P 500 futures upward. The Aussie outperformed after supportive economic data weighed against RBA rate cut speculation.

Most notably, building approvals unexpectedly posted the first year-on-year gain in six months. Traders may have interpreted the reading as indicative of bets on buoyant housing demand, meaning the central bank’s macro-prudential efforts to cool the real estate space are falling short. In turn, this may limit scope for easing in the near term. Indeed, the Aussie rallied alongside front-end bond yields.

The British Pound likewise pushed higher in a move that may reflect easing “Brexit” fears after an ORB poll showed 51 to 46 percent lead for respondents favoring the UK remaining in the European Union, with just 3 percent undecided. The US Dollar traded lower as 2-year T-bond futures rose, implying a pullback in front-end yields that may point to a moderation in Fed rate hike bets.

Looking ahead, May’s flash Eurozone CPI report headlines the data docket in European hours. The headline year-on-year inflation rate is expected to print -0.1 percent, marking the fourth consecutive month in negative territory. The outcome seems unlikely to trigger a strong response from the Euro as the ECB remains locked in wait-and-see mode, monitoring progress on existing stimulus efforts.

April’s US PCE inflation gauge – the Fed’s favored price growth indicator – captures the spotlight later in the day. The core year-on-year rate is forecast to register at 1.6 percent, unchanged from the prior month. US economic data has increasingly outperformed relative to consensus forecasts in recent weeks. This opens the door for an upside surprise that boosts June rate hike chances and sends the greenback upward.

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Asia Session

22:45NZDBuilding Permits (MoM) (APR)6.6%--9.7%
23:01GBPLloyds Business Barometer (MAY)32-38
23:30AUDWeekly Consumer Confidence Index (MAY 29)113.2-115.7
23:30JPYJobless Rate (APR)3.2%3.2%3.2%
23:30JPYJob-To-Applicant Ratio (APR)1.341.301.30
23:30JPYOverall Household Spending (YoY) (APR)-0.4%-1.3%-5.3%
23:50JPYIndustrial Production (MoM) (APR P)0.3%-1.5%3.8%
23:50JPYIndustrial Production (YoY) (APR P)-3.5%-5.0%0.2%
01:00NZDANZ Activity Outlook (MAY)30.4-32.1
01:00NZDANZ Business Confidence (MAY)11.3-6.2
01:30AUDNet Exports of GDP (1Q)
01:30AUDBoP Current Account Balance (1Q)-20.8b-19.5b-22.6b
01:30AUDBuilding Approvals (MoM) (APR)3.0%-3.0%2.9%
01:30AUDBuilding Approvals (YoY) (APR)0.7%-6.7%-5.4%
01:30AUDPrivate Sector Credit (MoM) (APR)0.5%0.5%0.4%
01:30AUDPrivate Sector Credit (YoY) (APR)6.7%6.5%6.4%
03:00NZDMoney Supply M3 (YoY) (APR)-7.8%
04:00JPYVehicle Production (YoY) (APR)-1.2%
05:00JPYSmall Business Confidence (MAY)47.547.8
05:00JPYHousing Starts (YoY) (APR)4.1%8.4%
05:00JPYAnnualized Housing Starts (APR)0.950m0.993m
05:00JPYConstruction Orders (YoY) (APR)-19.8%

European Session

06:00EURGerman Retail Sales (MoM) (APR)0.9%-1.4%Medium
06:00EURGerman Retail Sales (YoY) (APR)1.7%0.7%Medium
07:55EURGerman Unemployment Change (000's) (MAY)-5k-16kMedium
07:55EURGerman Unemployment Claims Rate SA (MAY)6.2%6.2%Medium
08:00EUREurozone M3 Money Supply (YoY) (APR)5.0%5.0%Medium
09:00EUREurozone Unemployment Rate (APR)10.2%10.2%Medium
09:00EUREurozone CPI Estimate (YoY) (MAY)-0.1%-0.2%High
09:00EUREurozone CPI Core (YoY) (MAY A)0.8%0.7%High
10:00EURItalian GDP WDA (QoQ) (1Q F)0.3%0.3%Low
10:00EURItalian GDP WDA (YoY) (1Q F)1.0%1.0%Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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