PBoC Acts, Crude & Copper on Top

Introduction

The Peoples’ Bank of China set the weakest reference rate for the Yuan in five years, setting the level at 6.54693 compared 6.5716 anticipated. The currency markets for USD/CNY and USD/CNH, along with the rest of USD/Asia FX, moved higher on this news. However the buoyancy did not last long. USD was ultimately under some potentially short lived pressure during Asian trading despite stronger than expected new home sales data. The price of crude oil has hit a seven-month high at US$49.35 whilst the active copper futures contracts rose by over half a percent, aiding Antipodean currencies in their reversals from declines yesterday.

Asian Session

Goldman Sachs Group Inc. indicated that it expects JPY to move lower by 12% over the next twelve months. USD/JPY has traded within a 68-pip range overnight with the door balance amidst recent good data, a potential benchmark interest-rate hike, but also downplaying rhetoric from St. Louis Fed President James Bullard. Speaking on television, Bullard mentioned that a June move by the central bank in the states should not be pre-empted and thus priced in, and also that a press conference does not have to essentially accompany such a hike.

Australian construction work data came in lower than previously, whilst Kiwi trade balance data added buoyancy to that currency. AUD and NZD have gained close to 0.5% and 0.25% respectively during APAC trading, with the price of cooper aiding the mining industries in Australia and New Zealand.

Singaporean GDP data proved largely in line with expectation as the trade and industry ministry maintained its growth forecast for 2016. Both KRW and MYR strengthened, as with other nearby countries’ currencies, largely on the back of the recent greenback weakness.

The day ahead in Europe and NY

EUR/USD trades at 1.1152 as London begins trading, after finance ministers across the continent agreed to a fresh EUR 10.3bio in new loans directed towards the Greek economy. German consumer confidence data has already been released and proved a little better than expected, whilst business climate details will print out of Frankfurt at 09:00 BST.

Aside from the aforementioned, the Swiss ZEW Survey will be released at 10:00 BST today. ECB Vice-President Victor Constâncio speaks at The Bank of England on Threadneedle Street in London. The speech is scheduled for 11:30 BST.

Goods trade balance data a house price index will be shown to the market in North America at 12:30 BST and 13:00 BST respectively today, not before mortgage application info at midday BST. Crude oil stocks info. will be closely eyed by commodity and currency traders, whilst PMI figures print at 14:45 BST. Patrick T. Harker of The Philly Fed. speaks at 14:00 BST. The Bank of Canada will release an interest rate statement half an hour into NY equity trading, and is also expected to keep its benchmark interest-rate fixed at 0.5%.

Spot

	Last	% since US Close	High	Low
EURUSD	1.1152	0.12	1.1158	1.1135
USDJPY	109.88	0.1	110.19	109.87
GBPUSD	1.461	-0.17	1.4638	1.4603
AUDUSD	0.7211	0.41	0.7219	0.7174
NZDUSD	0.6754	-0.25	0.6764	0.6734
USDCHF	0.9912	0.22	0.9936	0.9909
EURGBP	0.9635	-0.29	0.7639	0.7612
EURCHF	1.1058	0.7	1.1073	1.1051
USDCAD	1.3105	0.15	1.3133	1.3086
USDCNH	6.5608	0.9	6.5694	6.5605

FXO

The small possibility of a June hike from The US Federal Reserve is giving support to one month volatilities in both the EUR/USD and USD/JPY spaces. The respective straddles trade at 8.8% and 11.15%. Citibank options analysts note that the potential for BoJ monetary policy action ads the extra volatility to the one month USD/JPY strikes, and indeed gamma in that apace.

The strongest bias notable within the currency options space at Saxo Bank A/S can be seen regarding XAG/USD, USD/CHF and USD/JPY options. In each case, over 80% of traders prefer downside strikes.