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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

Talking Points:

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

21:00NZDRBNZ Official Cash Rate (JUN 9)2.25%2.25%2.25%
23:01GBPRICS House Price Balance (MAY)19%35%39%
23:50JPYMachine Orders (MoM) (APR)-11.0%-3.0%5.5%
23:50JPYMachine Orders (YoY) (APR)-8.2%-1.8%3.2%
23:50JPYMoney Stock M2 (YoY) (MAY)3.4%3.3%3.4%
23:50JPYMoney Stock M3 (YoY) (MAY)2.8%2.7%2.8%
01:30CNYCPI (YoY) (MAY)2.0%2.2%2.3%
01:30CNYPPI (YoY) (MAY)-2.8%-3.2%-3.4%
01:30JPYBOJ Nakaso Speaks in Akita ---
02:00JPYTokyo Avg Office Vacancies (MAY)4.05-4.23

European Session

05:45CHFUnemployment Rate (MAY)3.4%3.5%Medium
05:45CHFUnemployment Rate SA (MAY)3.5%3.5%Medium
06:00JPYMachine Tool Orders (YoY) (MAY P)--26.3%Low
06:00EURGerman Trade Balance (APR)22.8b26.2bMedium
06:00EURGerman Current Account Balance (APR)21.0b30.4bMedium
06:00EURGerman Exports SA (MoM) (APR)-0.8%1.9%Low
06:00EURGerman Imports SA (MoM) (APR)1.3%-2.3%Low
06:00EURGerman Labor Costs WDA (YoY) (1Q)-2.1%Low
06:00EURGerman Labor Costs SA (QoQ) (1Q)-0.5%Low
07:00EURECB's Draghi Speaks at Economic Forum--Medium
08:30GBPVisible Trade Balance (£/Mn) (APR)-11100-11204Medium
08:30GBPTrade Balance Non EU (£/Mn) (APR)-3200-3114Medium
08:30GBPTrade Balance (£/Mn) (APR)-3700-3830Medium
08:30EURECB's Villeroy, ESM's Regling Speak in Brussels --Low

Critical Levels

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

--- Written by Ilya Spivak, Currency Strategist for

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.