Currencies Take Cues from Sentiment Trends in Brexit Aftermath

2016-06-30 06:43:00

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