USD under broad pressure vs. all but gold, JPY, CHF.
CAD up 0.2%, a relative performer vs. most of its G10 peers.
EUR steadies in calmer trade; limited scope for gains; downside risk.
GBP climbs into NA open; risk in EU summit & tone of negotiations.
USDJPY remains remarkably range bound around 102; downside risk.
AUD bounces; struggling above 0.74; 12M OIS pricing one 25bpt cut.
CNY & CNH steady around recent lows; basket falls to fresh low.
FX Market Update.
A rebound in risk sentiment is prompting some sharp moves in the major currencies (see top chart). European stocks are more than 2% higher on the day and developed market bond yields are mixed to firmer (note Bloomberg reported earlier that Japanese government bonds across the entire curve are yielding 0.1% or below for the first time). Commodity prices reflect improving sentiment, with gold lower and crude oil prices higher on the day.
Little or nothing has changed overall from a market perspective, however – the broader political and economic uncertainties facing the UK remain intact and we think the USD remains a broadly attractive bet in uncertain times (even as markets price out pretty much all risk of a Fed tightening this year). Still, after the initial moves in response to Brexit, orderly markets – for the most part – have helped boost market sentiment to some extent.
Focus is starting to fall on month and quarter end flows – which may come through sporadically, given how the North American holidays fall this year. Despite Brexit, UK stocks have out-performed MTD, suggesting GBP selling from rebalancing flows. For the session ahead, US GDP revisions and housing data may not pique the market’s interest too much. Expect focus to remain on the headlines and the flows
Regards All Users.