Global Markets:

  • Japan (JPY) Final PMI Manufacturing [F]: 49.9, Expected: 49.9, Previous: 49.9
  • Japan (JPY) Capital Spending (y/y): 7.4%, Expected: 5.7%, Previous: 4.0%
  • Australia (AUD) Building Permits (APR) (y/y): 1.1%, Previous: 20.0%
  • Australia (AUD) MI Inflation Gauge (m/m): 0.3%, Previous: 0.4%
  • Australia (AUD) AiG Performance of Mfg Index (MAY): 49.2, Previous: 44.8
  • Asian stock markets: Nikkei is up 2 % on the day and Australia’s ASX gained 0.30 %; China and Hong Kong markets are closed for a holiday
  • Commodities: Gold at $1248, Silver at $18.76, Crude Oil at $103.20
  • Bonds: US 10 year yield at 2.486

CFTC Commitment of Traders Report:

  • EUR short contracts rose to 16,633 vs 9,220 shorts in the previous week
  • CAD shorts dropped to 21,810 contracts vs 26,534 in the previous week, least bearish since Nov
  • Traders reversed positions on CHF, with 3,872 short contracts vs 5,018 longs, 1st net short reading since Feb
  • GBP long contracts rose to 35,304 vs 33,090 longs in the previous week, 2nd straight increase after 4 straight declines
  • JPY shorts rose to 59,036 contracts vs 53,787 shorts in the previous week, which was least bearish since Nov. 2012
  • AUD longs fell to 15,848 vs 19,462 in the previous week, which was most bullish since April 2013

FX Update:

  • AUD – AUD/USD dropped overnight after disappointing Building Permits numbers. Selling was led by leveraged names and model funds and short covering in EUR/AUD kept the Aussie under pressure. Bids expected at 0.9250, better buying interest noted at 0.9220 and ahead of the 0.92 barrier option.
  • CAD – USD/CAD was trading in a 1.0835-1.0855 range. Bids are rebuilding at 1.0820 and talk of a barrier option resting at 1.08 could keep the pair bid in the short-term. Topside, offers clustered between 1.0870 and 1.0880. Plenty of risk events this week, both out of Canada and the US, so we should see the pair finally moving out of it’s 1.08-1.09 range.
  • EUR – EUR/USD was quiet as usual in the Asian session, but aforementioned flows in EUR/AUD added some support. Initial resistance at 1.3650 and plenty of selling interest from macro funds placed pre-1.37. Stops from short-term names resting through 1.3670/80. To the downside, key support now at 1.3585, with a break lower likely to attract selling from system funds and fast money accounts.
  • GBP – Offers in GBP/USD at 1.6780 and larger at 1.6820. Bids building again around 1.67 and stops seen sub-1.6690 in good size.
  • JPY – USD/JPY rallied overnight as risk sentiment improved. US 10 year yields slowly approaching 2.50 again. Exporters are said to have selling interest at 102.20, while bids from specs are building at 101.80.

The Week Ahead:

The key events this week will be the ECB meeting and US employment data. The market is expecting that the ECB will cut the main refi rate from 0.25 % to 0.10 % and the depo rate from 0.00 % to -0.10 %. Further easing is largely priced in, but traders will focus on whether the ECB will ease through a targeted LTRO or send signs of additional easing via the ABS market. Some bank analysts think that a rate cut alone would be disappointing for EUR bears, as the market is expecting a broader stimulus in addition to the cut.

On Monday, we will see a series of Manufacturing PMI releases, with the focus being on German, UK and US data. Tuesday will be busy with Australian Retail Sales, Chinese Manufacturing PMI, the RBA interest rate decision and Euro Zone inflation figures. Wednesday will bring Australian GDP data, Euro Zone CPI and PPI numbers and several Services PMI releases. Aside from the ECB meeting, we will also have US Initial Jobless Claims on Thursday. On Friday, the focus will be on German employment data and the NFP figure later in the day.

Upcoming Events:

  • 07:15 GMT – Spanish Manufacturing PMI (52.9)
  • 07:45 GMT – Italian Manufacturing PMI (53.7)
  • 07:50 GMT – French Manufacturing PMI (49.3)
  • 07:55 GMT – German Manufacturing PMI (52.9)
  • 08:00 GMT – Euro Zone Manufacturing PMI (52.5)
  • 08:30 GMT – UK Manufacturing PMI (57.0)
  • 12:00 GMT – German CPI (0.2 % MoM, 1.1 % YoY)
  • 14:00 GMT – US ISM Manufacturing PMI (55.5)