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  • BoE member speech-volatility tailed off in NY;  Cable ended NY 1.3203.
  • USD/JPY bounced from 55-D SMA down in the 109.30’s to the 200-DMA, capped at the familiar 110.20 resistance.
  • Market  sentiment  modestly upbeat after the Trump Administration signalled it would back down on new investment restrictions.

In FX today, while trade tensions continued to simmer in the background, the market’s sentiment was modestly upbeat after the Trump Administration signalled it would back down on new investment restrictions against China.

However, there remains an air of caution over trade tensions between the U.S. and major trading partners such as China and the European Union as these could develop into a big drag on the global economy. For the greenback, the Fed’s commitment to tightening policy in contrast with growing concern in rest of world keeps it underpinned.  

The US dollar rose against a wide range of currencies and the DXY recovered last two days’ losses, trading for the best part of the NY session the higher range of between 94.1710-94.7720. The US 10yr treasury yield, however, saw a  limited change and ranged sideways between 2.86% and 2.90%, while 2yr yields ranged between 2.52% and 2.55%. Fed fund futures yields continued to price 1.5 more hikes for 2018.

As for the euro, the DXY was a weight and the euro gave background after peripheral bond spreads widen while the DM bond markets were underpinned by haven bid. The NY session saw a bid in equities on the trade war relief aforementioned headlines, with attention turning to a range of political outcomes for the EU instead while there are still no solutions coming to the fore on migration from the EU summit later this week. EUR/USD fell from 1.1720 to 1.1635 while the May-June double-bottom bounce was rejected by the 61.8% fibo at 1.1722.  

For GBP/USD, there was plenty of action there in London trade where BoE member speech-volatility tailed off in NY from 1.3192 lows to a high of 1.3236 and price action moving into consolidation between 1.3210/30. Incoming BoE’s Haskel, in stark contrast to  McCafferty, was wary of economic slack in the UK.   McCafferty said that the central bank shouldn’t dally on interest rate increase and that the likelihood that recent downtrend in inflation will slow over the course of the year. Cable ended NY 1.3203. As for the cross, the dovish tilt from the BoE aided a bid in EUR/GBP that ended NY at 0.8816 and higher by +0.05%with in the NY range of between 0.8802-0.8822, (200-D SMA at 0.8820 capped the bid).  

With stocks on the rise, USD/JPY bounced from 55-D SMA down in the 109.30’s to the 200-DMA, capped at the familiar 110.20 resistance level but the move was also as undermined by a lack of follow-through in US yields and a mundane activity in the yield spread. Meanwhile, for the higher betas, it was one-way traffic to the downside with the meltdown in the Chinese currency weighing on sentiment, (market recalling 2015 PBoC move), and prospects of trade wars/global recision pressuring the commodity space. gold at fresh YTD lows is a telling sign as well. AUD/USD dropped from 0.7420 to 0.7380/90 while the bird fell from 0.6900 to 0.6847 as the weakest in the G10 on the day.  

Key notes from US session:

Wall Street buoyed by energy, ends day with modest gains

Key events ahead:

The ANZ Business Outlook survey will be watched closely ahead of the RBNZ tomorrow.