Wednesday 27th May: European Open Briefing

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Global Markets:

  • Asian stock markets: Nikkei up 0.10 %, Shanghai Composite gained 0.15 %, Hang Seng declined 0.25 %, ASX fell 0.65 %
  • Commodities: Gold at $1188 (+0.05 %), Silver at $16.78 (+0.15 %), WTI Oil at $58.40 (+0.60 %), Brent Oil at $63.95 (+0.01 %)
  • Rates: US 10 year yield at 2.15, UK 10 year yield at 1.87, German 10 year yield at 0.55

News & Data:

  • Australia MI Leading Index 0.1 %, Previous: -0.3 %
  • Australia Construction Work Done -2.4 %, Expected: -1.5 %, Previous: -0.6 %
  • Riksbank’s Jansson: Riksbank prepared for FX intervention
  • Fed Lacker: June a good time to consider hikes, but undecided just yet
  • Fed's Lacker sees risks that the Fed may move too late
  • BOJ Minutes: Many members say BOJ to continue easing until 2% inflation stable, BOJ will check risks, adjust policy as needed
  • BOJ: Many members viewed QQE as exerting intended effects; a few members said CPI not reach 2% in projection period
  • BOJ: 1 member sees 2% CPI likely around 1H FY2016
  • BoJ's Iwata: No Need To Change Commitment To Hit Inflation Target ASAP, with timeframe around 2 years
  • BoJ's Iwata: Exports are likely to grow moderately, helped by recovery in overseas economies and the weaker yen –DJ
  • RBA Deputy Governor Lowe: Would welcome A$ weakness on Fed hikes
  • Japan Cabinet Secretary Suga: We will continue to pay close attention to FX rates
  • Suga: Yen declines not excessive yet; excessive FX volatility is undesirable

Markets Update:

The US Dollar strengthened further after a series of solid US econ data yesterday. Durable Goods Orders, New Home Sales and Consumer Confidence data all arrived higher than expected, which kept the Greenback bid and sent the S&P 500 lower. The largest flows were seen in USD/JPY, which took out two key resistance levels with much effort. No significant resistance now seen until 124. It is also notable that positioning data shows that speculators are not nearly as long USD/JPY as they have been last year, which should make it easier for the pair to rally even further. It seems that 121-125 could be the new range for USD/JPY in the near future.

The overnight session was rather quiet, with no major data releases. The Bank of Japan released their meeting minutes, but they did not contain anything surprising. Some Japanese officials said that they are paying close attention to FX rates, but no one commented on any specific levels.

Looking ahead, the econ calendar is rather light with the Bank of Canada rate decision at 15:00 BST the only notable event.

Upcoming Events:

  • 07:00 BST – German GfK Consumer Confidence
  • 08:30 BST – Swedish Trade Balance
  • 13:55 BST – US Redbook
  • 15:00 BST – Bank of Canada Interest Rate Decision

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