The USD bulls took a breather in Monday’s Asian trading and sent the US dollar broadly lower from multi-day tops reached after a stronger US retail sales report. Therefore, most majors breathed a sigh of relief on broad-based US dollar retreat.
The Kiwi emerged the top beneficiary and regained the 0.65 handle, up 0.30% on the day. The spot also cheered the risk-on sentiment amid higher Asian equities and a lack of fresh trade-related updates. The Aussie followed suit and bounced to near 0.6880 levels while the anti-risk Yen remained on the back foot around 108.60 region vs. the greenback almost throughout the session.
Among the European currency pairs, EUR/USD extended the bounce above the 1.12 handle while the Cable traded better bid as the outcome of the UK PM’s race became clearer after Sunday’s debate amongst the UK PM hopefuls.
On the commodities front, both crude benchmarks traded flat amid ongoing Middle East tensions while gold prices on Comex looked to stabilize around 1245 levels.
Main Topics in Asia
India’s retaliatory tariffs on US come into effect for 28 items – Bloomberg
Chinese state media warns retaliation against US tariffs could ‘become routine’ – South China Morning Post
Tasnim: Iran to scale back nuclear deal commitments – Reuters
Iranian politician: US hegemony challenges world peace, stability – Xinhua
ECB’s De Guindos: The EU central bank will act if inflation expectations are de-anchored
Saudi Energy Minister hopes OPEC agrees to extend production cut ‘early July’
UK’s Hancock: PM Candidate Boris Johnson and I have had our differences but he’s the one to unite us – The UK Times
BCC cuts UK 2020 growth forecast
Gold: Signs of bullish exhaustion ahead of the Fed
WTI confronts immediate resistance-line amid supply crunch signals
EU calls for dialogue to ease tensions in the Gulf region – KUNA
China’s NDRC: Will oppose anyone’s attempt to use Chinese rare earths products to suppress China’s development
Shanghai Composite remains trapped in two-month sideways channel
Key Focus Ahead
There is nothing of note for the EUR, GBP traders this Monday, as the EUR calendar is likely to be a thin-showing. Markets await the Eurozone Q1 Labor Cost data due at 0900 GMT and the German Bundesbank’s monthly economic report for some trading impetus. Meanwhile, the UK traders will react to the outcome of the UK PM candidates’ debate amid a lack of fresh economic news.
Likewise, the NA session also remains data-sparse, with the NY Empire State Manufacturing Index due on the cards at 1230 GMT alongside the releases of the Canadian Portfolio Investments data for April. The speech by the Bank of Canada (BOC) board member Schembri remains in focus at 1830 GMT. However, the spotlight will remain on the European Central Bank (ECB) President Draghi’s speech scheduled at 1700 GMT.
Markets remain focussed on the key central banks’ monetary policy decisions due later this week including the Federal Reserve (Fed), Bank of England (BOE) and the Bank of Japan (BOJ).
EUR/USD: Double bottom breakout fails ahead of the Fed
The bullish case for EUR/USD has weakened ahead of the FOMC (Federal Open Market Committee) rate decision due this Wednesday. The currency pair closed well below 1.1263 on Friday, invalidating the double bottom breakout confirmed on June 6.
GBP/USD consolidates the downside near 1.2600, UK politics in spotlight
Given the lack of data/events at home and abroad, political plays ahead of Tuesday’s another round of voting to select Tory leader will gain major market attention for fresh impulse.
GBP/USD Forecast: Bracing for the BOE, Boris Johnson and the Fed
The Tories will hold additional leadership votes in parliament on Tuesday, Wednesday, and Thursday. BOE Governor Carney will have two opportunities to move the pound. Carney’s second influence on the pound is more significant.
Goldman Sachs sceptical of ‘insurance’ US rate cuts from Fed
In the latest client note released on Sunday, the Goldman Sachs economists maintained their view that the Fed would refrain from slashing rates until there is evidence of significant deterioration in business and consumer activities.
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