Market Brief
In spite of significant geopolitical tensions, risk appetite rallied back in most assets. Regional Asian equity indices were all in the green. The Nikkei experience a large gap up at 15,364.51 waving off yesterdays sluggish performances in Europe and on Wall Street. Other indices fared well as the Hang Seng rose 1.36% and Shanghai composite climbed 1.03%. AUD/USD rose to 0.9396 on short covering as the RBA Governor Stevens speech didn’t provide the fireworks on rates or FX many had anticipated. RBA Governor Steven's speech concentrated on the issues and policy since the 2008 financial crisis. But had little specific comments on Australia’s current situation or policy strategy. After the long weekend JPY traded in a bullish summer style. USD/JPY rose to 101.57 as traders realized the Nikkei gains would hold but trading remained thin. BoJ Governor Kuroda was on the wires suggesting that he would not hesitate to adjust monetary policy should risks to progam increase. But the tough talk had a muted direct effect on JPY. He then went on to state the corporate line that the BoJ has halfway towards achieving their price target and would continue with QQE, which was working. Comments only worth noting on this financial news deprived session.
Traders focus today will remain on events surrounding the Ukraine and Gaza with only 2nd tier data scheduled. EU leader are scheduled to meet to discuss options regarding the Ukraine. Despite today’s risk rally, safe-haven trades are broadly in demand with gold, USD and U.S. 10-Year treasury yields (hovering around 2.5%) still viewed has hedges against geopolitical risks. In EM markets, verbal pressure and new sanctions on Russia has had a profound effect on Russian equity markets. Russian stocks are near a 3-month low and down over 7% in the last 10 days. However, so far there is scant sign of real contagion with sell-offs being contain to local markets.
On the docket today, we have UK Private Sector Net Borrowing which is anticipated to fall to 9.4bn in June verse 11.5bn in May. In Switzerland, trade balance is expected to drop slightly to 2.78bn in June from 2.85bn in May. And finally in the US, Headline CPI y/y should increase to 2.2% y/y while existing home sales should see a health recovery to 5M.
Currency Tech
EUR/USD
R 2: 1.3559
R 1: 1.3545
CURRENT: 1.3521
S 1: 1.3518
S 2: 1.3498
GBP/USD
R 2: 1.7122
R 1: 1.7100
CURRENT: 1.7078
S 1: 1.7074
S 2: 1.7050
USD/JPY
R 2: 101.58
R 1: 101.41
CURRENT: 101.52
S 1: 101.21
S 2: 101.07
USD/CHF
R 2: 0.9002
R 1: 0.8990
CURRENT: 0.8985
S 1: 0.8971
S 2: 0.8960