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Currencies Take Cues from Sentiment Trends in Brexit Aftermath

Currencies Take Cues from Sentiment Trends in Brexit Aftermath

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar, Yen gain as NZ Dollar weakens amid corrective price action
  • Markets to overlook UK GDP, Eurozone CPI as Brexit clouds policy bets
  • Risk trends set to define G10 FX price action as markets digest volatility

The major currencies were little-changed in overnight trade, with markets seemingly settling into consolidation mode. The US Dollar and Japanese Yen corrected modestly higher having broadly underperformed against their top counterparts yesterday. The New Zealand Dollar dutifully pulled back having led the way higher in the prior session. Haven currencies retreated while higher-yielding alternatives found strength alongside stock prices on Wednesday as risk appetite recovered amid a lull in fresh fodder feeding Brexit-inspired volatility.

The final revision of first-quarter UK GDP figures and June’s flash Eurozone CPI data headline the economic calendar in European hours. The former is seen confirming that the economy added 0.4 percent in the three months through March. The latter is expected to show the headline year-on-year inflation rate registered flat, a nominal improvement after four months of deflation. Neither outcome is likely to inspire a strong reaction from price action considering central banks on both sides of the English Channel have their hands tied by Brexit-linked uncertainty in the near term.

This puts the spotlight on central bank commentary. Comments from Bank of England Governor Mark Carney may offer greater detail on how the post-Brexit reaction thus far fit into the BOE’s scenario analysis and hint at what the near-term policy response could look like. Separately, remarks from St. Louis Fed President James Bullard could help illuminate the thinking on the FOMC about knock-on effects from the UK’s decision to leave the EU on the path of interest rate hikes.

The probability of hearing trend-defining commentary seems low. Federal Reserve and BOE officials have almost certainly decided on a wait-and-see approach for now, waiting to assess the referendum’s impact on progress toward their policy objectives. With that in mind, the broadly consolidative tone in sentiment trends is likely to persist and set the tone for G10 FX.

How are traders positioned in the British Pound after last week’s volatility? Find out here!

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Building Permits (MoM) (MAY)

-0.9%

-

6.8%

23:05

GBP

GfK Consumer Confidence (JUN)

-1

-2

-1

23:50

JPY

Loans & Discounts Corp (YoY) (MAY)

2.58%

-

3.05%

23:50

JPY

Industrial Production (MoM) (MAY P)

-2.3%

-0.2%

0.5%

23:50

JPY

Industrial Production (YoY) (MAY P)

-0.1%

1.9%

-3.3%

01:00

NZD

ANZ Activity Outlook (JUN)

35.1

-

30.4

01:00

NZD

ANZ Business Confidence (JUN)

20.2

-

11.3

01:30

AUD

Job vacancies (MAY)

-1.9%

-

2.7%

01:30

AUD

Private Sector Credit (MoM) (MAY)

0.4%

0.5%

0.5%

01:30

AUD

Private Sector Credit (YoY) (MAY)

6.5%

6.7%

6.7%

03:00

NZD

M3 Money Supply (YoY) (MAY)

7.3%

-

7.8%

04:00

JPY

Vehicle Production (YoY) (MAY)

1.7%

-

-9.7%

05:00

JPY

Housing Starts (YoY) (MAY)

9.8%

4.8%

9.0%

05:00

JPY

Annualized Housing Starts (MAY)

1.017m

0.973m

0.995m

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

06:00

EUR

German Retail Sales (MoM) (MAY)

0.6%

-0.3%

Medium

06:00

EUR

German Retail Sales (YoY) (MAY)

2.5%

2.3%

Medium

07:00

CHF

KOF Leading Indicator (JUN)

102.6

102.9

Low

07:55

EUR

German Unemployment Change (000's) (JUN)

-5k

-11k

Medium

07:55

EUR

German Unemployment Claims Rate SA (JUN)

6.1%

6.1%

Medium

08:30

GBP

GDP (QoQ) (1QF)

0.4%

0.4%

High

08:30

GBP

GDP (YoY) (1QF)

2.0%

2.0%

High

08:30

GBP

Current Account Balance (1Q)

-28.0b

-32.7b

Low

08:30

GBP

Index of Services (MoM) (APR)

0.2%

-0.1%

Low

08:30

GBP

Index of Services (3M/3M) (APR)

0.4%

0.6%

Low

08:30

GBP

Total Business Investment (QoQ) (1QF)

-

-0.5%

Low

08:30

GBP

Total Business Investment (YoY) (1QF)

-

-0.4%

Low

09:00

EUR

Eurozone CPI Estimate (YoY) (JUN)

0.0%

-0.1%

High

09:00

EUR

Eurozone CPI Core (YoY) (JUN A)

0.8%

0.8%

High

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.0939

1.1020

1.1073

1.1101

1.1154

1.1182

1.1263

GBPUSD

1.2925

1.3171

1.3300

1.3417

1.3546

1.3663

1.3909

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

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

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