Market wrap: all quiet ahead of the FOMC meeting - Westpac

Analysts at Westpac offered market wrap.

Key Quotes:

"Markets understandably ignored the vague pledges of the Trump-Kim meeting in Singapore, as they have generally done in recent months as North Korea has become conciliatory. Korean equities closed dead flat and European markets remained focused on the key meetings at the Fed today and ECB tomorrow.

There was however a modest rise in the US dollar against some currencies after a Wall Street Journal article claiming that Fed chairman Powell is considering holding press conferences after every meeting, rather than only after the major quarterly meetings. One implication could be that every meeting becomes “live” for policy change.

EUR/USD was flat on the day at 1.1780 ahead of the WSJ headlines, then dropped quickly to lows under 1.1740, steadying down just 0.3% overall. GBP/USD whipped around on Brexit-related headlines, squeezing higher on indications that the UK parliament would have a greater say in any Brexit deal but then sliding back to be unchanged on the day, around 1.3375.

USD/JPY rose only fractionally on the WSJ headlines, mostly trading sideways inside 110.10-110.50. AUD/USD traded very quietly around 0.7600-0.7620 through London trade but was sensitive to the WSJ story, dropping as low as 0.7566, heading into Sydney trade down around -0.5% overall. NZD fell from 0.7035 to a 0.6977 low. AUD/NZD fell from 1.0830 to 1.0810.

The US 10yr treasury yield rose during the London morning, from 2.94% to 2.98%, later reversing to 2.96%, while 2yr yields rose slightly from 2.52% to 2.54%. Fed fund futures were little changed and continued to predict a rate hike on Wednesday and another by year end.

German ZEW June surveys of investor sentiment pulled back more than expected (headline 80.6, exp. 85.0, prior 87.4). This was especially notable in expectations for both Germany (-16.1, prior -8.2) and Eurozone (-12.6, prior +2.4) and again highlights the extending of soft data in Q2.

UK April labour data was broadly in line with expectations (unemployment rate remained at 4.2%) but the rise in employment (3mth rise of 146k, exp 120k) failed to maintain the recent rise in weekly earnings (ex-bonus) which dipped from a near 3 year high of 2.9% to 2.8% y/y."