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Yen May Extend Gains as Sentiment Sours, Brexit News a Wildcard

Yen May Extend Gains as Sentiment Sours, Brexit News a Wildcard

2016-06-09 04:34:00
Ilya Spivak, Head Strategist, APAC
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Talking Points:

  • New Zealand Dollar soars as RBNZ plays down interest rate cut outlook
  • Japanese Yen gains amid risk aversion in Asian trade, US Dollar weakens
  • Sentiment trends likely to remain at the forefront, Brexit news a wildcard

The New Zealand Dollar outperformed in overnight trade after the RBNZ signaled it was in no hurry to cut interest rates again. Governor Graeme Wheeler said house price inflation remains a concern for financial stability, hinting that policymakers will need to wait for macro-prudential measures to cool activity before lowering borrowing costs. He added that long-term price growth expectations are well-anchored at 2 percent while short-term ones appear to have stabilized, seemingly downplaying the urgency of stimulus expansion. The Kiwi rallied alongside front-end bond yields, underscoring the markets’ relatively hawkish interpretation of the outcome.

The Japanese Yen likewise traded higher as stocks declined, boosting demand for the anti-risk currency. The MSCI Asia Pacific regional benchmark equity index declined 0.2 percent. The US Dollar traded broadly lower in a move that tracked Treasury bond yields lower, which markets may have interpreted as signaling eroding Fed rate hike expectations. It should be noted that overnight risk aversion is consistent with lower yields as safe-haven demand pushes capital toward Treasuries, so the decline in yields may be reflective of sentiment swings rather than a dovish shift in the FOMC policy outlook.

Looking ahead, a quiet economic calendar in US and European hours leaves the major currencies without a readily-apparent standout catalyst. This may keep risk sentiment at the forefront. S&P 500 futures are pointing cautiously lower, hinting that overnight trading patters may carry through in the hours ahead. “Brexit”-related headline risk remains a wild card. Markets have become increasingly sensitive to polling data ahead of the June 23 referendum and the release of new numbers implying an emerging skew either for or against a UK exit from the EU is likely to echo in risk on/off dynamics.

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

21:00

NZD

RBNZ Official Cash Rate (JUN 9)

2.25%

2.25%

2.25%

23:01

GBP

RICS House Price Balance (MAY)

19%

35%

39%

23:50

JPY

Machine Orders (MoM) (APR)

-11.0%

-3.0%

5.5%

23:50

JPY

Machine Orders (YoY) (APR)

-8.2%

-1.8%

3.2%

23:50

JPY

Money Stock M2 (YoY) (MAY)

3.4%

3.3%

3.4%

23:50

JPY

Money Stock M3 (YoY) (MAY)

2.8%

2.7%

2.8%

01:30

CNY

CPI (YoY) (MAY)

2.0%

2.2%

2.3%

01:30

CNY

PPI (YoY) (MAY)

-2.8%

-3.2%

-3.4%

01:30

JPY

BOJ Nakaso Speaks in Akita

-

-

-

02:00

JPY

Tokyo Avg Office Vacancies (MAY)

4.05

-

4.23

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

05:45

CHF

Unemployment Rate (MAY)

3.4%

3.5%

Medium

05:45

CHF

Unemployment Rate SA (MAY)

3.5%

3.5%

Medium

06:00

JPY

Machine Tool Orders (YoY) (MAY P)

-

-26.3%

Low

06:00

EUR

German Trade Balance (APR)

22.8b

26.2b

Medium

06:00

EUR

German Current Account Balance (APR)

21.0b

30.4b

Medium

06:00

EUR

German Exports SA (MoM) (APR)

-0.8%

1.9%

Low

06:00

EUR

German Imports SA (MoM) (APR)

1.3%

-2.3%

Low

06:00

EUR

German Labor Costs WDA (YoY) (1Q)

-

2.1%

Low

06:00

EUR

German Labor Costs SA (QoQ) (1Q)

-

0.5%

Low

07:00

EUR

ECB's Draghi Speaks at Economic Forum

-

-

Medium

08:30

GBP

Visible Trade Balance (£/Mn) (APR)

-11100

-11204

Medium

08:30

GBP

Trade Balance Non EU (£/Mn) (APR)

-3200

-3114

Medium

08:30

GBP

Trade Balance (£/Mn) (APR)

-3700

-3830

Medium

08:30

EUR

ECB's Villeroy, ESM's Regling Speak in Brussels

-

-

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.1275

1.1331

1.1363

1.1387

1.1419

1.1443

1.1499

GBP/USD

1.4335

1.4435

1.4470

1.4535

1.4570

1.4635

1.4735

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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