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

2016-06-09 04:34:00

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