Softer risk tones prevailed across the financial markets in Asia on Monday, as the Asian equity markets slipped on decreased odds of aggressive Fed rate cuts following the Non-Farm Payrolls surprise last Friday.
The US dollar consolidated the post-NFP upsurge, leaving most majors in a thin trading range. However, the USD/JPY pair reversed from highs near 108.58 and fell to 108.30 levels amid fresh weakness in Treasury yields on escalating US-Iran geopolitical tensions and increased nervousness ahead of the US-China trade talks.
Amid risk-aversion, gold futures on Comex managed to regain the 1400 mark while both crude benchmarks stalled their recent advances. The Antipodeans attempted a minor recovery, but the further upside lacked follow-through. The Aussie was capped by the 0.70 handle while the Kiwi ranged below the 0.6650 barrier. Both the European currencies, EUR/USD and the Cable looked to stabilize heading into a big week ahead.
The big mover in Asia was the Turkish Lira, as it slumped over 2% against the greenback following the weekend report that Turkey’s President Erdogan sacked the central bank governor Cetinkaya. Cetinkaya’s dismissal raised questions over the independence of the Turkish central bank under Erdogan’s Presidency.
Main Topics in Asia
USD/TRY: Turkish Lira slips as Erdogan sacks central bank governor
US-China trade war: Ignore the hype, Trump and Xi are no closer to a deal - SCMP
ECB's Villeroy: It's up to political leaders to reduce uncertainties
Trump: Iran better be careful after nuclear breach
WTI on a back foot below 100-day EMA
Australian Job Ads: A sharp rebound - ANZ
BOJ's Kuroda: Will maintain easing for as long as needed to hit stable 2% inflation
China's forex reserves rise to highest since April 2018 - Bloomberg
China’s Vice President Wang: China will stay committed to opening up
S. Korean FinMin: Japan curbs on exports violates WTO agreement
Asian stocks slip on dampened Fed rate cut expectations
Indonesian consumer confidence dips in June, Rupiah under pressure
Key Focus Ahead
A data-light calendar extends into Monday’s European session, with the German Industrial Production and Trade figures (due at 0600 GMT) to offer some fresh incentives to the EUR, GBP traders. The German industrial output is likely to contract further in May. Later at 0830 GMT, the Eurozone Sentix Investors Confidence gauge for July will be released, which is expected to arrive at 0.0 vs. June’s -3.3.
Meanwhile, both the US and UK docket remain data-empty and hence, the attention shifts towards key US macro releases, the Fed Chair Powell’s testimony and the FOMC June meeting’s minutes due on the cards later this week.
Apart from the macro events, the developments surrounding the US-China trade talks, Iranian geopolitical tensions and UK political scenario will continue to grab attention for fresh trading impetus.
When is the German industrial production and how could it affect EUR/USD?
Going by the lead indicators, the probability of industrial production printing below estimates is high. A bigger-than-expected contraction will only strengthen the case for an early stimulus by the ECB and send the EUR/USD pair lower toward the support at 1.1181 (June 18 high).
GBP/USD: Buyers await fresh hints to shore up odds for soft Brexit
US Dollar (USD) pullback and fresh optimism surrounding Brexit trigger the GBP/USD recovery. The UK BRC Retail Sales and trade/political headlines can direct near-term trade sentiment amid lack of scheduled data.
EUR/USD Forecast: dull week ends with a bang, eyes turn to the Fed
The upcoming week will bring more clarity about the Fed’s path. Chief Jerome Powell is due to testify before the Congress, while the central bank will release the Minutes of its latest meeting.
Gold technical analysis: Forming a double top?
Gold is creating a double top on the daily chart. A break below $1,382 would confirm double top breakdown. The prospects of a double top breakdown, however, would weaken if the metal rises above Friday’s high of $1,424.
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