Broad-based US dollar weakness remained the main underlying theme in Asia on Thursday, as the greenback extended its post-dovish FOMC slide versus its main competitors. The USD index hit fresh six-week lows at 96.86 after 10-year Treasury yields dropped below the 2% level, its lowest since November 2016.
The US Federal Reserve, on Wednesday, kept rates on-hold but suggested probable interest rate cuts in the future, citing rising “uncertainties” about the economic outlook. Gold prices on Comex rallied to fresh 15-month highs at 1395.35 on hopes that an era of lower interest rates will be back in play. The traditional safe-haven also drew support from the escalating Middle East geopolitical tensions, which also collaborated to the USD/JPY declines. The spot hit fresh 5-month lows near mid-107s on falling Treasury yields and amid the absence of any dovish surprises from the Bank of Japan (BOJ). The BOJ kept its monetary policy settings unchanged, as widely expected.
The Kiwi was the biggest gainer this session, having surged to 0.6580 levels on upbeat New Zealand’s Q1 growth figures while the AUD/USD pair consolidated the latest upmove just under the 0.69 handle, as the bulls lost vigor following the dovish comments from the Reserve Bank of Australia (RBA) Governor Lowe. Meanwhile, the rest of the majors held onto strong overnight gains amid broad USD softness. The Loonie further benefited from the oil-price rally, as WTI remained poised to regain the 55 handle.
Main Topics in Asia
New Zealand GDP: Quarterly rise 0.6% (2.5% annual/a beat
Trump believes he has the authority to replace Powell at Fed
US 10-year treasury yield drops below 2%
Market-based measures of US inflation rise as Fed hints at rate cuts
Goldman Sachs: Fed to cut rates in September and December
Gold rallies into blue skies as US yields drop to lowest since 2017
USD/IDR drops to 100-day SMA ahead of Bank Indonesia rate decision
WTI prices are 0.50% higher as dollar bleeds out
RBA Bulletin examines the exchange rate on a China slowdown
US Pres. Trump: It’s important to have good relationships with China and Russia
RBA’s Lowe: “Not unrealistic” to expect a further reduction in the cash rate
RBA’s Lowe: Upside risk on inflation are very remote
BOJ keeps policy unchanged, as widely expected
BOJ: Downside risks on overseas economies high
White House: US is closely monitoring situation on missile strikes into Saudi Arabia
Iran shoots down US spy drone – Sepah News
China Premier Li: China will maintain its long-standing commitment to reform and opening up
Key Focus Ahead
Another eventful EUR macro calendar is awaiting the traders this Thursday, with the Bank of England (BOE) monetary policy decision and its meeting’s minutes to headline. The BOE decision and the minutes will be published at 1100 GMT. The central bank is widely expected to keep the rates on hold and could switch to a dovish bias amid looming no-deal Brexit risks, global economic slowdown and dovish global central banks.
Ahead of the BOE event, the focus will remain on the BOJ Governor Kuroda’s post-policy presser, Swiss trade data and the Bank Indonesia’s monetary policy decision. Also of note remains the UK retail sales data, due at 0830 GMT, which is expected to show a sharp decline in consumer spending in the month of May. At 0900 GMT, the ECB Economic Bulletin will be eyed for fresh EUR moves, as there is no relevant data on the cards from Euroland.
The NA session also sees a fresh batch of US economic data due at 1230 GMT, including the weekly Jobless Claims, Q1 Current Account and the Philly Fed Manufacturing Index. At the same time, the Canadian ADP Employment Change numbers will be published. Later at 1400 GMT, the Eurozone Consumer Confidence gauge will drop in and is expected to hold steady at -6.5. Towards NY close (at 2000 GMT), the BOE Governor Carney will be seen speaking at the Mansion House dinner, in London.
EUR/USD rises above 200-HMA as US two-year yield hits lowest since November 2017
EUR/USD has cleared key resistance and may rise further in the European and US session, tracking the slide in Treasury yields, although bullish reversal may remain elusive as markets are now priced in for Fed rate cuts.
GBP/USD rises to 1-week high ahead of UK retail sales, BOE
With the US Dollar’s (USD) across the board slump offering additional strength to rest of the major currencies, the GBP/USD pair extended the previous rise towards one week high ahead of the London open. Focus on UK retail sales and BOE monetary policy decision.
Indonesia: Bank Indonesia likely to maintain status quo – TDS
Mitul Kotecha, senior emerging markets strategist at TD Securities, expects no change from Bank Indonesia, with the 7d reverse repo likely to be maintained at 6% on Thursday 20th June, but think this meeting is a much closer call than recent ones.
Bank of England Rate Decision Preview: The Fed example
Bank of England expected to leave its bank rate at 0.75%. Monetary Policy Committee anticipated to maintain its rate hike bias. The bank will face market skepticism over tightening policy.
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