Cautious optimism coupled with broad-based US dollar weakness emerged the main theme in Asia this Tuesday, as the Federal Reserve (Fed) begins its two-day monetary policy review meeting later today, with the outcome likely to be announced on Wednesday.
Amongst the G10 currencies, the Yen was the top performer, with the USD/JPY pair down 0.25% to 108.25 levels amid falling Japanese stocks, Treasury yields and broad USD weakness. On the other hand, the AUD/USD pair wilted to fresh 5-month lows near 0.6830 region after the Reserve Bank of Australia’s (RBA) June monetary policy meeting’s minutes suggested that further rate cuts are more likely in the months ahead. The NZD/USD bounce stalled just ahead of the 0.65 handle, as traders await the key fundamentals from New Zealand for fresh direction. Meanwhile, the Cable caught a fresh selling wave and refreshed 5-month lows at 1.2514 on the reports that the UK Finance Minster Hammond is set to resign. The Euro, on the other hand, extended the corrective bounce towards 1.1250 against the greenback.
On the commodities space, Gold prices on Comex traded mildly bid near 1245 levels, having benefitted from geopolitical tensions, weaker US rates and pre-Fed caution trading. Meanwhile, both crude benchmarks were sidelined amid a lack of fresh catalysts and ahead of the US weekly crude supply reports.
Main Topics in Asia
Mexico’s Obrador: Could win trade war with US but that would be a ‘Pyrrhic’ victory it does not seek
US Defense Secretary Shanahan: The US does not seek conflict with Iran
China cuts treasury holdings to two-year low amid trade war – Bloomberg
Gold technical analysis: Summer 2016 highs in the 1370s in sight
WTI remains defensive around $51.80 despite geopolitical tensions
RBA minutes: Further monetary policy easing likely ahead
China home prices ticked +0.7% higher in May
BOJ's Kuroda: Global economic uncertainty is high
GBP/USD hits fresh 5-month lows as UK FinMin Hammond ‘prepared to resign’
Australian Treasurer Frydenberg: Will introduce the tax package in the first week of parliament
AUD Bearish: Dalian iron ore falls for second straight session over demand concerns
Asian stocks ex-Nikkei report modest gains ahead of Fed meeting
Fitch lowers India's growth forecast to 6.6% for FY 2019-20, INR better bid
Key Focus Ahead
We have a fairly busy EUR calendar ahead, with plenty of event risks from the Euroland, including the macro data and the European Central Bank (ECB) speak at Sintra conference. Markets look forward to the speeches by the ECB President Mario Draghi and Vice-President Luis De Guindos, scheduled at 0800 GMT and 0830 GMT respectively, for fresh hints on the monetary policy and economic outlook. At 0900 GMT, a flurry of economic releases are slated for release, viz., the German ZEW Survey, Eurozone Trade Balance, final Consumer Price Index (CPI) and ZEW survey. From the UK docket, there is nothing of note and hence, the uncertainty around the UK political climate will continue to drive the GBP moves.
Across the pond, we see the US Housing Starts and Building Permits data dropping in at 1230 GMT alongside the release of the Canadian Manufacturing Sales that are expected to a smaller increase for April. Later at 1400 GMT, the Bank of England (BOE) Governor Mark Carney is due to speak alongside his ECB counterpart Draghi and ECB policymaker Lane. Also, in focus remain New Zealand’s (NZ) fortnightly GDT Price Index, due on the cards around 1400 GMT. Towards NY close, the American Petroleum Institute (API) weekly crude stockpiles data will be closely followed (at 2030 GMT) for fresh direction on the US oil prices.
EUR/USD flirts with 50-hour MA ahead of German ZEW survey, Draghi's speech
EUR/USD is chipping away at the 50-hour moving average line ahead of the European Central Bank (ECB) President Mario Draghi's speech and key German data releases. ECB's Draghi has little room to sound hawkish.
GBP/USD: Sellers dominate ahead of Carney’s speech, Conservative voting
Bears continue to hold the reins of GBP/USD amid political pessimism as the pair trades near 1.2514, the fresh five-month low, before the second round of voting for the Tory leadership and Carney’s speech.
Gold: Summer 2016 highs in the 1370s in sight
For gold bulls, the Jan and April highs came in around 1365 which guards the summer 2016 highs in the 1370s ahead of the Sep 2013 highs in the 1435s.
Dovish FOMC to focus on falling inflation expectations – Morgan Stanley
Analysts at Morgan Stanley offer their expectations on Wednesday’s FOMC monetary policy decision due to be announced at 1800 GMT.
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