Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 102.215 | EURUSD 1.11029 | AUDUSD 0.74688 | NZDUSD 0.71315 | USDCAD 1.30045 | USDCHF 0.97253 | GBPUSD 1.36763 |

 

LMAX Ranges 6am London time

Highs    Lows

EURUSD               1.10790 | 1.09845

USDJPY                 102.475 | 101.467

GBPUSD               1.36000 | 1.33558

USDCHF               0.97574 | 0.97081

AUDUSD              0.74443 | 0.73852

USDCAD               1.30874 | 1.30152

NZDUSD               0.71143 | 0.70465

EURCHF                1.07514 | 1.07205

EURGBP               0.82419 | 0.81828

EURJPY                 113.268 | 111.650

For today

• EUR: Very little data for the day is likely to see the market dominated by the UK leaving the European union, Spanish voting appears not to be as close as the market and media expected with the expected drift to the left not materializing and the PP taking 137 seats however, however, this was insufficient for the centre right parties to take control with the PP-C (centre right) parties with 169 seats and some 7 seats short for a majority and leaving Spain with negotiations likely to be the only choice before the country again faces fresh attempts to deal with the situation, in the meantime it would seem that the UK’s 2yrs to negotiate its exit is likely to be a threat to stability and the EU officials are already talking about the exit to be as quick as possible to contain any contagion as other countries already look at the situation as a possible sign to exit themselves. Opening around the 1.1020 areas the market saw limited rises into the Tokyo session before the market moved steadily lower through the session testing weakly through the 1.1000 areas before holding lightly on the level through to the London session, Topside offers are uncertain however, a move through the 1.1220 areas there is limited prospects of a short squeeze however, the topside is likely to be limited by the EURGBP with possible offers through the 0.8300-0.8400 areas with real money likely to take advantage of any movement higher, however, the downside is certainly open to the 1.0950 areas before bids start to appear in the market with further bids likely to continue through to the 1.0820 areas, however, even while these points on the charts are likely to see technical bids the downside is just as uncertain as the Cable and GBP is likely to continue to dominate the market throughout the day or the news that appears.
• GBP: So being British I would like to say that the country took the win for Brexit was dealt with dignity and solidness one would expect from the UK however, it would seem that with the advent of the digital age the children in us all comes out to play and then the politicians move in to gloat, threaten and rile animosity within the islands, however, this was nothing compared to the seemingly collapse of the political parties in fact if it wasn’t so serious it would be laughable with the Labour party sacking a senior one of the Shadow cabinet and then several other resigning as the party descends into chaos, while the incumbent party remained broadly intact the search for a new PM as David Cameron resigned and the search for his replacement started, add to which S&P talking about the loss of the AAA rating setting the cat amongst the pigeons the market found itself under pressure from different directions and Cable opened in the pre-market period falling quickly and the opening around the 1.3445 areas some 200 pips away from Fridays close, the market continued to see sellers through the session with the market attempting the topside but never with any real conviction and then slipping below 1.3400 levels and testing towards the 1.3350 areas before steadying through the session and moving back to 1.3400 as the market approaches the London session, the market through the Asian session saw commentaries continuing from various Government ministers across the globe, with concerns for the world economy weighing on many minds some conciliatory and others less so. Topside offers likely to be lined up however, any glint of hope for a deal or a suggestion of a deal as unlikely as that may seem could see a short squeeze however, there is very little to quantify any moves with the Cable with the downside likely to see profit taking and hedging moving in however, this is all about the days reports and commentary which are likely to continue coming quick and fast over the session.
• JPY: USDJPY opened some 50 pips lower and then spent the early session with the market moving higher in the first hour to fill the gap on the charts as the USDJPY reacted to talk of intervention, whether this is a moot point with talk on Friday of at least a smoothing operation at one point however, this gave the USDJPY early positioning and the market tested through to the 102.40 areas before the market again started to see the safe haven flows and the market quickly falling back to the 101.60 levels and never really getting off those lows, with the BoJ holding an emergency meeting to strengthen their resolve in the face of Brexit, Topside offers likely to see weak offers into the 103.00 areas however, a push through the level could open a short squeeze to the 104.50 areas and then further offers on any move towards the 105.00 levels. Downside bids likely into the 101.00 areas with those bids likely to be weak having been cleared on Friday, with better bids likely to move in below the 101.00 areas and into 100.00 and this is the concern for the BoJ and likely to be part of the meeting this morning.
• AUD: The Oz was the tightest of the markets with the opening around the 0.7420 areas making slight gains to test the 0.7450 areas before drifting off through the session to base around the 74 cent levels and dipping a little through 0.7390 and then holding 74 cent through to the London session, Downside bids likely to see strength on a dip towards the 73 cent levels with likely stops appearing on a push through the level to open up further weakness into the 0.7240-60 areas, a break here will likely see some bids in the 72 cent levels however, stronger bids are likely to be building into the 0.7150-0.7100 areas for the moment. Topside offers likely into the 0.7450 levels however, these could be weak and the push through will see very little in the way of stops for the moment and better bids likely from then on through sentimental levels.

Overnight News                                                                  

JPY:

Japan’s Aso: Abe Asked for Various Measures to Stabilize Markets

Japan’s Abe: Told Finance Minister, BOJ to Watch Markets Closely

Japanese Lawmakers Demand Action to Counter Yen’s Surge: Nikkei

Hamada Says Case for Yen Intervention Has Strengthened: WSJ

Ex-BOJ Momma: No Need for Stimulus If Turmoil Temporary: Reuters

EUR:

Rajoy Wins as Spain Cleaves to Establishment amid Brexit Mayhem

EUR/GBP:

U.K. Should Take Time to Reflect, EU Parliament’s Lamberts Says

CNY:

China Has Enough Policy Tools to Cope With Challenges: Premier

Premier Li Says No Basis for Yuan Depreciation in Long Term

China to Implement Prudent Monetary Policy in Flexible Way: Li

China’s Li Says Brexit Referendum Adds Uncertainties to World

China Economy May Face Double-Dip Recovery: Sec. Journal

China’s May Industrial Companies’ Profit Rises 3.7% Y/y

GBP:

U.K. Survey Shows 1/5 Co’s. May Move Out Operations: Guardian

USD:

Clinton Says U.S. Resilient, Will Bounce Back From Brexit Shock

IMF:

IMF’s Lagarde: Brexit Effect Hinges on Policymakers’ Next Move

CHF:

SNB Says Negative Rates, Interventions Form Basic Policy: Op-Ed

NZD:

Key Says Unlikely N.Z. Economy Will Suffer From Brexit Decision

NZ’s Key Says Tax Changes for Multinationals Are a Possibility

New Zealand May Trade Surplus Beats Estimate on Exports

New Zealand May Residential Mortgage Lending Rises 18% Y/Y

SGD:

Singapore Air Says a Boeing 777-300ER Plane Engine Caught Fire

Today’s data

Actual = A | Consensus = C | Previous = P | Revised = R All timings GMT

NZD       Trade Balance (NZD) May A 358M | C 185M | P 292M | R 326M

08:00     EUR        Eurozone M3 Y/Y May C 4.80% | P 4.60%

12:30     USD       Advance Goods Trade Balance May C -59.5B | P -57.5B

Weekend News

G7:

G-7: Will Consult Closely on Market Movements and Stability
GBP:

U.K. Rating at Risk of Downgrade by Moody’s, S&P on Brexit
U.K. CEOs Seek Govt. Aid in Lessening Brexit Harm: Telegraph
Half Corbyn’s Senior Team Set to Quit as British Turmoil Worsens
Scottish Poll Shows Majority Backs Independence: Sunday Post
EUR:

European Union’s Aaa Rating Affirmed by Moody’s; Outlook Stable
Rajoy Tackles Podemos in Spanish Vote as Brexit Roils Europe
Germany, France Struggle to Hold EU Centre Amid Brexit Storm
ECB’s Villeroy Says Talks on U.K. Exit Need to Begin Swiftly
France’s Macron Warns Against Knee-Jerk Referendums in Europe
Italy’s Padoan Says ‘Time to Think the Unthinkable’: Corriere
EUR/GBP:

U.K. Must Leave EU as Soon as Possible, EU Foreign Ministers Say
Brexit Not ‘Beginning of the End’ for EU, Juncker Tells Bild
Merkel Says U.K. Exit Talks With EU ‘Shouldn’t Drag On Forever’
GBP/EUR:

U.K. Businesses Press for Continued Access to EU: Telegraph
BIS/GBP:

BIS Central Bankers Endorse BOE’s Brexit Contingency Measures
JPY:

Japan Considers Unilateral Yen Intervention Post Brexit: Nikkei
Japan’s Aso, Kuroda Pledge to Work Closely with G-7 on Brexit
Japan to Expand Economic Stimulus to 10 Trillion Yen: Yomiuri
Japan Officials Meet to Prepare for Market Moves Next Week
Japan to Introduce Index for Loans Regional Banks Provide: Asahi
Japan MOF to Mull Improving JGB Dealer Perks, Nikkei Reports
JPY/GBP:

Japan to Consider Support for Co’s With U.K. Operations: Nikkei
USD:

Trump Says His Immigration Policy: No ‘Mass Deportations’
USD/GBP:

Brexit Spawned by Tensions Over Globalization, Obama Says
CNY/GBP:

China Respects U.K. Vote to Leave EU, Vice Foreign Minister Says
China Finance Minister Says Markets Overreacted to Brexit
CNY:

Zhou Says PBOC Can Cut Unnecessary Forex Control Measures
China’s Asian Infrastructure Bank Considering Local Bond Sale
PBOC to Study Alibaba Shadow Banking Issues: Zhou
CNY/TWD:

China Halts Taiwan Liaison Link on Lack of One-China Support
CNY/RUB:

China, Russia Sign MOU for Yuan Settlement in Russia: PBOC
INR/CNY:

India to Seek $2-$3 Billion Infrastructure Funds from AIIB
KRW/CNY:

S.Korea Prime Minister to Visit China to Meet Xi Jinping: Yonhap
KRW/GBP:

S.Korea to Consider Bilateral Trade Deal with U.K. After Brexit
AUD:

Turnbull Says Australia Needs Stability after Brexit Vote
HUF:

Hungary May Benefit From Exit in L/T If No EU Change: Kover
NOK:

Norway Transport Worker Strike to Hit Airport Fuelling, NTB Says

Harry Hindsight

• EUR: The market gapped higher on UK exit polls showing a close contest but signs of a remain win, opening around the 1.1425 levels the market moved into the opening Tokyo holding those levels before drifting back as early EURGBP selling moved into the market and the Euro drifting back a little and then the first results started to arrive, and the move in GBP was quick and savage, Euro’s was continually dragged lower by the moves in the GBP and the whole market was dominated by the result with the Euro moving to the 1.1300 levels steadily through the first hour before dropping another big figure to the 1.1200 quickly before bouncing only a little and continuing the drop through over the next few hours to push into the 1.0920’s before finding some support through into the London session, the market rallied into the early session with IFO numbers broadly ignored testing to the 1.1200 areas before again drifting off to the 1.1050 areas and through into the NYK session, NYK were steady buyers in the Euro however, while the market was wide for most of the day with the ranges very extended before finishing the session around the 1.1100 areas.
• GBP: Early trading saw the Cable test above the 1.5000 levels with exit polls indicating a tight result and some politicians on the Brexit side already talking about the remain campaign winning however, with the first results seen and better results for the out campaign appearing in the North East of England expected to be in the remain camp the Cable dropped off quickly trading to the 1.4400 areas before bouncing as the market agreed it was too early to have any clear picture, however, all through the results it was clear that some expected strong Remain votes were just not there and at best remained marginal with the leave camps numbers swelling through the session, as the lead grew to the 1mio market the market again saw a large drop as spread betting venues favoured the exit more and more, the market then spent the next few hours dropping further trading down to the 1.3600 levels before the selling slowed however, it didn’t stop and the market slowly tested into the pre London session trading down into the 1.3220-30 areas before bouncing, the move into London started to rise through into the London session pushing steadily towards the 1.4000 levels, as the session moved on the market struggled through into the NYK session holding above the 1.3600 levels with the range covering 1.3600-1.3800 for the rest of the session but very unconvincing and with margins raised throughout the market the movement was dictated by more serious funds and real money types.
• JPY: USDJPY was little different from the other markets with the JPY becoming the focus of safe haven buying throughout the session however, from the opening 106.70 highs the market slipped back into Tokyo before the first results were seen and the collapse was only second to the move in Cable itself with the USDJPY quickly pushing towards the 103.00 areas before bouncing back to the 105.00 levels and holding for a couple of hours before bouncing around and the Cable moved again, USDJPY tested into the 103.00 levels again and was unable to bounce back this time, the final big move of the day came a couple of hours later as the market finally knew there was no coming back by the Remain party and the market in USDJPY dropped quickly to test briefly through the 99.00 areas bouncing quickly from the level as the market was caught short and the rise back to the 101.50 was fairly strong and although the market again dipped before the London session however, the market was unable to test through the 100 levels this time and the rise through into the mid-morning into London saw the market moving through the 103.00 levels and then into the NYK period holding in a tight range through to the close below the 102.50 levels but holding above 102.00.
• AUD: While GBP was sold against everything the sheer force of the drop dragged most of the major currencies lower with the Oz being no exception, equities around the globe were hit and the only thing rising were commodity prices, opening just below the 0.7650 levels the market dropped back into the Tokyo session back to the 0.7525 areas on the first indication of the out camp winning and then as with the others as the out camp started to pull further ahead and GBP moved deeper and deeper the Oz eventually got pulled below the 75 cent levels and then saw a strong dip to the 0.7320 areas before finding sufficient buying interest holding the levels into the London session and starting a steady rise through the day to push back to the 74 cent levels and then 75 cents as the NYK session moved in finish the day just below that level.

Friday’s premiership results

Actual = A | Consensus = C | Previous = P | Revised = R All timings GMT

JPY         Corporate Service Price Y/Y May A 0.20% | C 0.10% | P 0.20% | R 0.30%

EUR        German IFO – Business Climate Jun A 108.7 | C 107.6 | P 107.7

EUR        German IFO – Current Assessment Jun A 114.5 | C 114 | P 114.2

EUR        German IFO – Expectations Jun A 103.1 | C 101.2 | P 101.6

GBP       BBA Mortgage Approvals May A 42.2K | C 37.9K | P 40.1K | R 40.0K

USD       Durable Goods Orders May (P) A -2.20% | C -0.80% | P 3.40% | R -0.80%

USD       Durables Ex Transportation May (P) A -0.30% | C 0.30% | P 0.50%

USD       U. of Michigan Confidence Jun (F) A 93.5 | C 94.2 | P 94.3

Stay lucky

Andy

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