FX Daily - Westpac

Westpac analysts with their take on the broader markets for today.

Key quotes

"Trade concerns seemed to weigh on sentiment in Asia, with sharp losses for the likes of the Korean won and Thai baht and equities mostly weak, though of course China and Hong Kong were closed. European equities were also soft and bonds rallied, consistent with a jittery mood. But net moves in the US were contained.

EUR/USD bounced off 1.1565 to 1.1620, virtually flat on the day. Sterling underperformed, GBP/USD slipping 30 pips to 1.3250, eyeing Thursday’s Bank of England meeting. USD/JPY stabilized after its slide in Sydney trade, ranging between 110.40 and 110.60.

AUD/USD resumed its decline in NY trade. At 0.7420/25, it is down only 20 pips on the day but it is very close to setting new lows since June 2017. NZD/USD was choppy over the day but little changed at 0.6940 and back. AUD/NZD fell from 1.0730 to 1.0686 – a one-month low. 

Atlanta Fed president Bostic said he expected one more hike in 2018 and John Williams advocated transparency on his first day as NY Fed president.

In Germany, bubbling tension within the long-standing CDU/CSU alliance is putting strain on Merkel’s vulnerable coalition. CSU (Bavarian sister party to CDU) want to impose harsh migrant controls that oppose the ethos of both Merkel’s CDU and their socialist coalition partners SPD. It also resurrects the broader migrant crisis that has subsided but still plagues Europe and has led to the rise of far-right and populist movements across the Eurozone and the Eastern EU members and now even Sweden. The two weeks into the EU Leaders Summit (28-29th June), where immigration is now the key topic, are going to be full of political negotiations.

 The minutes from the RBA Board’s June meeting are due at 11:30am Syd/9:30am Sing/HK. With policy very firmly on hold, it is hard to see any market impact from the release. Any further details on the thinking around wages growth and also house prices would be of interest.

The US data calendar this week holds little danger for markets. Today we see May housing starts and building permits. Monthly volatility can be substantial but the basic picture on housing construction is steady recovery since 2011 but activity still a long way short of the 2006 peak."