Market Drivers June 06, 2017
Europe and Asia
AUD: CA Next Exports -0.7% vs. -0.1
AUD: RBA 1.5%
EUR: Retail PMI 52 vs. 52.7
North America
USD: IBD Eco Optimism 10:00
CAD: Ivey PMI 10:00
FX markets were hit with a bout of risk aversion in Asian session trade today as USD/JPY lost more than 80 points on heavy selling in Tokyo. The move was partly driven by the continuing compression in US yields and partly by fresh revelations that Russia meddled in the US election cycle. US authorities arrested an NSA contract worker who they believed was the leaker of classified information regarding US evidence of Russian wrongdoing. Although US authorities tried to present the issue as a plug of an intelligence leak, the very act confirmed that US has hard evidence of Russian meddling which is likely to cause further political problems for the Trump administration.
We have argued for several days that USD/JPY remained under pressure for both economic and political reasons and today's price action confirmed our view as the pair filled the gap left open by the Macron win in the first round of French election at the beginning of May. Elsewhere, the Aussie went for a rollercoaster ride, first dropping 30 pips on news that Current Account data came in softer than expected with next exports printing at -0.7% versus -0.4% eyed.
This is likely to cause a downward surprise in the GDP reading later today. The market is anticipating 0.2% print but it's very possible that the reading could actually come in negative. Nevertheless, the Aussie regained almost all of the losses after RBA reaffirmed its neutral stance in its monthly statement which kept rates at 1.5%. Still if the GDP data does print negative, the pair is vulnerable to further downside shocks and could test the .7400 figure on any miss to the forecast.
In North America today the calendar is very quiet with only a second tier sentiment survey on the docket, but FX markets will continue to take their cues from fixed income and equity flows. If risk aversion sentiment remains in place USD/JPY could drift all the way towards 109.00 as the day proceeds.