US AM Digest: USD Muted Despite Inflation Rising to 6-yr Highs, GBP Eyes Brexit Vote
- Historic Summit Between President Trump and Kim Jong Un leads to denuclearisation deal
- UK Labour Market Remains Robust Despite Miss in Average Earnings
- German Investor Morale Falls on Sep 2012 Low on Trade War Concerns
- US Inflation prints in-line with expectations at 2.8% on the year
USD: Overnight, saw a historic summit take place between President Trump and North Korean Leader Kim Jong Un, whereby both leaders signed a landmark deal which will involve the denuclearisation of the Koran peninsula. The optimism over peace hasn’t filtered into a significant strength in the USD index with the basket slipping 0.1%, while initial USDJPY appreciation had run into sellers at 110.50. Markets seemingly looking through this summit with eyes on the Fed and ECB monetary policy decisions.
Elsewhere, US CPI printed in-line with expectations across the board with a muted reaction seen in the USD, given that the FOMC meeting is 100% priced in for a hike, while the central bank has also noted that they will accept an inflation overshoot, consequently reducing odds of the Fed aggressively raising rates.
GBP: UK labour market remains robust with employment continuing to rise, while jobless claims slipped 7.7k, however this had been met with slowing wage growth components, subsequently providing a relatively mixed report. As such, GBP had held 1.34 against the USD for much of the morning, although uncertainty over the Brexit vote with parliament set to vote on the Brexit legislation has kept GBP offered. Rumours had surfaced that the government could lose the meaningful vote amendment if there is no concession. Focus on 1.3340 to the downside, whereby a break may exacerbate further GBP weakness.
EUR: Gains in Euro capped for now following another bearish report out of Germany as the latest ZEW survey showed that German sentiment fell to its lowest level since September 2012 amid concerns over the escalating trade dispute with the US. EURUSD support comes in at 1.1725, while a breach above the 1.1840 resistance could open up the doors for 1.19.
DailyFX Economic Calendar: Tuesday, June 12, 2018 – North American Releases
DailyWebinar Calendar: Tuesday, June 12, 2018
IG Client Sentiment Index: USDJPY Chart of the Day
USDJPY: Data shows 53.0% of traders are net-long with the ratio of traders long to short at 1.13 to 1. The number of traders net-long is 3.9% higher than yesterday and 4.1% lower from last week, while the number of traders net-short is 3.1% lower than yesterday and 7.6% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY prices may continue to fall. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USDJPY trading bias.
Five Things Traders are Reading
- “US Dollar Shrugs Off Trump-Kim Summit, Eyes FOMC and ECB” by Christopher Vecchio, CFA, Sr. Currency Strategist
- “Financial Market Sentiment Turns Positive | Webinar”by Martin Essex, MSTA , Analyst and Editor
- “Ripple (XRP) and Litecoin (LTC) Price Charts: Dead Cat Bounce?” by Nick Cawley, Market Analyst
- “Global Trade Wars Weigh on German Sentiment which Falls to Sep 2012 Low” by Justin McQueen, Market Analyst
- “Precious Metals Charts – Silver Rally at Risk, Gold Breakout Nearing” by Paul Robinson, Market Analyst
--- Written by Justin McQueen, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.