Econ Data/News:

  • Reserve Bank of Australia keeps cash rate unchanged at 2.50 %
  • China (CNY) HSBC Manufacturing PMI (MAY): 49.4, Expected: 49.7, Previous: 48.1
  • China (CNY) Non-Manufacturing PMI: 55.5, Previous: 54.8
  • Australia (AUD) Retail Sales s.a. (APR) (m/m): 0.2%, Expected: 0.2%, Previous: 0.1%
  • Australia (AUD) Current Account: -5.7B, Expected: -7.0B, Previous: -10.1B
  • Japan (JPY) Monetary Base (y/y): 45.6%, Expected: 51.2%, Previous: 48.5%
  • Head of Japan’s largest pension fund (GPIF) expected to release new investment policies in August – Nikkei

 

Who said What:

  • BOJ’s Kuroda: Inflation is not only due to the weak Yen lifting import prices, domestic demand is also contributing
  • Kuroda: Doesn’t see any limits to the possible methods for more easing if needed
  • Kuroda: 2% inflation likely to be reached in FY2015. BOJ will not hesitate to make policy adjustments if needed
  • Japan Finance Minister Aso says it is important to create an economic environment where 10% tax is possible
  • Aso: A corporate tax cut is possible if replacement revenue is found

 

Global Markets:

  • Asian stock markets: Nikkei is up 0.90 %, Shanghai Composite gained 0.20 %, Hang Seng rose 0.60 %
  • Commodities: Gold at $1243, Silver at $18.79, Crude Oil at $102.54
  • Bonds: US 10 year yield at 2.52

 

FX Update:

  • AUD – The RBA statement didn’t contain any surprises, so AUD/USD didn’t move much. Bids at 0.9220 and then again ahead of the 0.92 barrier option. Stops are large sub-0.92 and through 0.9190. There is a $1.5 billion option expiry at 0.92 today as well, which may help attract price towards the level. To the topside, offers from 0.93 up to 0.9320.
  • CAD – USD/CAD bounced yesterday and reached a high of 1.0910 in the late NY session. This was mainly driven by general USD strength and shorts getting squeezed. Banks don’t see any larger offers until 1.0940-50.
  • CHF – USD/CHF took out some important tech resistance levels, but failed to break above 0.90. Bids noted towards 0.8950 and to the topside, momentum funds have buy orders should we see a break through the big figure.
  • EUR – EUR/USD declined after a series of bad PMI releases and lower than expected German regional CPI data. The 1.3586 support level held however and dealers saw macro funds taking profits pre-ECB, as well as demand from reserve managers. This led to a bounce back above 1.36, but the pair is likely to remain offered ahead of the key risk event on Thursday. Intraday, the key levels are 1.3630, 1.3650 and 1.3680 to the topside and 1.3586 to the downside. Stops from short-term specs resting above 1.3630 and good selling interest towards 1.3650 from various names.
  • JPY – USD/JPY rallied yesterday on the solid US econ data and talk that the GFIP will reveal it’s new policy in August. Demand from macro names and system funds sent the pair up to 102.47, though we didn’t make it above 102.50. Overnight, Japanese names were on the bid and dealers expect to see good demand towards 102.20 and 102.00. To the topside, offers are solid from 102.50 to 102.60, with stops in the mix. Unlikely we will see a major breakout ahead of the NFP data, so 102.90-103.00 should cap the topside until then.

 

Upcoming Events:

  • 09:00 GMT – Euro Zone CPI (0.7 % YoY)
  • 09:00 GMT – Euro Zone Core CPI (0.9 % YoY)
  • 09:00 GMT – Euro Zone Unemployment Rate (11.8 %)
  • 14:00 GMT – US Factory Orders (0.6 % MoM)