Thursday 18th June: European Open Briefing

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Thursday 18th June: European Open Briefing 1

Global Markets:

  • Asian stock markets: Nikkei down 0.85 %, Shanghai Composite fell 0.20 %, Hang Seng declined 0.05 %, ASX dropped 1.50 %
  • Commodities: Gold at $1187 (+0.90 %), Silver at $16.14 (+1.20 %), WTI Oil at $60.00 (-0.55 %), Brent Oil at $63.65 (-0.05 %)
  • Rates: US 10 year yield at 2.27, UK 10 year yield at 2.07, German 10 year yield at 0.81

News & Data:

  • New Zealand GDP 0.2 % q/q, Expected: 0.6 %, Previous: 0.8 %
  • New Zealand GDP 2.6 % y/y, Expected: 3.0 %, Previous: 3.5 %
  • Japan Tankan Index 14.0, Previous: 13.0
  • China House Prices -5.7 %, Previous: -6.1 %
  • BoJ Policy Board Split May Dilute Monetary Stimulus — Nikkei
  • New Zealand FinMin English: Could Do With Lower NZ$ — CNBC
  • German FinMin Schäuble: Can Only Give Aid If Greece Meets Obligations – Bild
  • ECB’s Weidmann: Greek Default Consequences Hard To Control — Les Echos

FOMC Meeting:

  • Federal Reserve Keeps Rates Unchanged, As Expected
  • FOMC: Risks To Economy And Labour Market Remains Finely Balanced
  • Fed Says Economic Activity Expanding Moderately, Pace Of Job Gains Picked Up Us
  • Fed Officials Forecast Slightly Slower Pace Of Future Interest Rate Hikes, See Slower GDP Growth In Short Term
  • Fed Repeats It Will Raise Rates After Further Improvement In Labour Market And When It Is "Reasonably Confident" Inflation Will Move Back To Its 2 % Target
  • Fed Says Inflation Continues To Run Below Target; Energy Prices Appear To Have Stabilized
  • Fed Says Underutilization Of Labour Resources Diminished Somewhat
  • Fed Repeats Risks To Economy And Labour Market Remain Nearly Balanced
  • Fed Vote In Favour Of Policy Was Unanimous
  • Fed's Yellen Says Since Last Meeting, Pace Of Job Gains Has Picked Up
  • Fed's Yellen Says Downward Pressure On Inflation Abating
  • Fed's Yellen Says Conditions For Hike Not Yet Achieved
  • Fed's Yellen Says Hike Will Depend On Incoming Data
  • Fed's Yellen Says Will Assess Hike Rates On Meeting By Meeting Basis
  • Fed's Yellen Says Importance Of Initial Hike Should Not Be Overstated

Markets Update:

The US Dollar weakened after a rather dovish FOMC. Fed Chair Yellen said that the economy was likely strong enough to support an increase in interest rates this year, but the central bank also lowered its economic and federal funds rate forecasts. Looking at the dot charts the Fed releases, Yellen now expects only one rate hike this year vs. two rate increases previously. The FOMC made it clear once again that they are data-dependent. A rate hike in September is certainly possible, but far away from being certain.

USD bulls were hoping for some hawkish messages from the Fed that could spark further momentum in the currency's uptrend, but Yellen failed to deliver, so there was broad USD selling after the press conference was over. EUR/USD is slowly approaching the 1.14 level. There is talk of option-related supply ahead of the level, but it is unlikely to be a major obstacle. GBP/USD is very well bid after decent UK econ data in the past few weeks and there is no major resistance until 1.60 now. USD/JPY under pressure and a move towards 122.00 seems likely in the near-term.

Meanwhile, commodity currencies are not benefiting much from the USD weakness. NZD/USD declined sharply after weak GDP data, which dragged the Aussie Dollar lower as well.

Upcoming Events:

  • 08:30 BST – SNB Rate Decision
  • 08:30 BST – SNB Chairman Jordan speaks
  • 09:00 BST – Norges Bank Rate Decision
  • 09:00 BST – ECB Economic Bulletin
  • 09:30 BST – UK Retail Sales
  • 13:30 BST – US CPI
  • 13:30 BST – US Current Account
  • 13:30 BST – US Initial Jobless Claims
  • 15:00 BST – US Philadelphia Fed Manufacturing Index

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