Pound, Euro, Australian Dollar, New Zealand Dollar, EMS, Stock Growth
Summary: BUT incandescent US CPIthen highest reading in 13 years could not budge Dollar against this is main rivals. Main consumer price index for May increased 0.6% after the splash 0.8% in April, higher than median forecast at 0.4%, in the biggest win insofar as June 2009 Annually, May inflation rose to 5.0% compared with 4.2% in April. Markets expected inflation growth which is constantly understated Federal Reserve officials… Promotions rallied while treasury yield expanded their slide. IN US 10-year bond yield declined to 1.44%, the lowest close since March. German 10-year Bund Yield was the last in -0.26% (-0.25%). IN American S&P 500 rose to a record high before closing at 4 238, an increase of 0.35%. IN European Central bank left rates unchanged (0.00%), higher growth forecasts but avoided any cone talk. IN Euro finished apartment in New York, in 1.2176 (1.2174) after initial rallying 1.2218 Overnight. Sterling defied gravity, rallied 1.4175 in the end New York (1.4111 yesterday), ending as best result main. IN Pound brushed aside the possible delay in his “Freedom Day” on June 21 opening. Leading risk AUD / USD rallied to finish in 0.7755, near weekly highs on more stable stocks as well as in general, the dollar is weaker. IN Dollar slid against Japanese yen to 109.32 of 109.63, weighed softer Productivity in the USA. Vs An emerging market as well as Asian currenciesthen Greenback also lost ground. IN US dollar / Singapore dollar couple slipped on 1.3232 of 1.3244 until USD / CNH relieved 6.3850 (6.3880).
Other data released yesterday: Japanese producer prices for May. rose to 4.9% per annum from 3.7% in April. RICS UK house prices rose to 83% of 75%. Industrial production in France in April slipped to –0.1% upward revised march figure 1.0% (from 0.8%). May new loans to China rose to 1,500 billion yuan of 1.470 billion yuan in April. U.S. Unemployment Insurance Claims has improved to 376,000 from the previous week 385,000, but above forecasts for 370,000.
- EUR / USD – The relentlessly operating ECB has failed to shake the common currency. EUR / USD first fell to an overnight low of 1.21432, and then returned to the session and closed at 1.2173, slightly changed from yesterday.
- GBP / USD – the trading session fell sharply to 1.40729 after reports that the long-awaited “Freedom Day” in the UK, which will open on June 21, will be postponed. The British pound rose on the weakening US dollar, which failed to strengthen despite high inflation.
- USD / JPY – The dollar fell against the yen as the yield on US 10-year bonds continued to decline to 1.44% (1.49% yesterday), a low not seen since March. USD / JPY closed at 109.31 from 109.63 yesterday. The yield on Japan’s 10-year-old JGB was at 0.04% from 0.06% yesterday.
- AUD / USD – strengthened from a baseline at 0.77152 (overnight low) to 0.7755 in late New York, in line with its weekly highs. General weakness in the dollar and stronger stocks supported the Australian Battler.
Looking for: Last night’s heated inflation data in the US failed to excite the markets and lift the US dollar. Representatives of the Federal Reserve System have repeatedly repeated their mantra that the rise in inflation in the United States is temporary. Today there is a report on consumer sentiment from the University of Michigan, USA, which is expected to grow.
Other data released today: New Zealand PMI for May, which was released, rose to 58.6 from 58.4 in April. NZD / USD remained virtually unchanged from the NY close at 0.7195. Japan publishes 2Q BSI manufacturing index (rising to 1.9 from 1.6). UK starts in Europe with GDP in March at 2.1% (f / c between 2.2% – Finlogix and 2.4% FX Factory). This is followed by the UK industrial production in April (f / cm / m 1.2% from 1.8% and 30.5% y / y from 3.6% – Finlogix). This is followed by industrial production in the UK (f / cm / m 1.5% with 2.1% and 41.8% y / y with 4.8% Finlogix). This is followed by the UK trade balance for April (f / c -12.1 billion pounds sterling from -11.71 billion pounds sterling – Finlogix). Germany announces its wholesale prices in May (f / c 0.9% from 1.1% – FX Factory). The preliminary June US University of Michigan Consumer Sentiment Index rounds up daily reports (f / c 84.0 vs. 82.9 – Finlogix). The G7 summit continues in the British resort town of Cornwall.
Trading perspective: The foreign exchange markets were eagerly awaiting the publication of the US CPI and the ECB meeting. The US dollar tried to break higher, but bond and equity traders knew better and focused on “transitional” rather than constant inflation variables. Today watch the preliminary US Consumer Sentiment Index report from the University of Michigan for June. A higher value is projected to 84.0 compared to the previous 82.9 in May. Monitor the bond markets reaction and the 10-year US Treasury yield.
Today is Friday and we can expect the forex market to consolidate first within familiar ranges. The risk lies in complacency at current levels. Earlier this week, we reported that speculators sold additional USD / bought currency in the latest COT report (week ending June 1). A higher than forecasted US UOM Consumer Sentiment Index report could mean that short dollar positions will seek to cover. This is the risk.
- EUR / USD – the common currency traded in a relatively tight range between 1.21432 and 1.21947, closing at 1.2173, little change from yesterday’s close at 1.2175. The ECB did not surprise European traders. Despite refining forecasts for future growth and inflation, President Christine Lagarde and her colleagues avoided talking about phase-out. The EUR / USD pair has immediate resistance at 1.2200 and 1.2230. The nearest support is at 1.2140, 1.2110 and 1.2080. Look for a likely trade between 1.2130 and 1.2200. The risk is lower as speculators continue to hold long euro rates.
- GBP / USD – Sterling managed to climb near session highs at the close, to 1.4175 (1.4110), becoming the best currency. The British pound did not pay attention to talks about a possible delay in the opening of the “Freedom Day” in the UK. GBP / USD has immediate support at 1.4140, 1.4110 and 1.4070. The nearest resistance is at 1.4190, 1.4210 and 1.4230. Look for a probable trade between 1.4110-80 first. While speculators cut their long sterling rates (the latest COT report ended on June 1), there is a risk of a decline in the pound given that markets were oblivious to any potentially bad news. UK GDP, trade, manufacturing and manufacturing data are due tonight. Any surprises could shake Sterling up.
- USD / JPY – The dollar fell to 109.33 against the yen, close to an overnight low of 109.313. The decline in the yield on 10-year US bonds to 1.44%, the March lows, put pressure on this pair. However, the yield on Japanese 10-year-old JGBs also fell 2 basis points to 0.04% (from 0.06%). This should cushion the further drop in USD / JPY. Overnight, the traded high was 109.795. Immediate support is at 109.30, 109.00 and 108.70. The nearest resistance is located at 109.60, 109.90 and 110.20. Expect USD / JPY to trade between 109.30-109.80. Look at the US 10-year bond yields tonight for clues.
- AUD / USD – The Aussie Battler bounced from 0.77152 lows to 0.77635 overnight high, supported by a weaker dollar and higher stocks. AUD / USD closed the New York session at 0.7755, higher than yesterday’s opening at 0.7730. The Aussie has immediate resistance at 0.7770 and 0.7800. Immediate support is at 0.7735, 0.7715 and 0.7685. Expect the Australian dollar to trade in the 0.7720-70 range today. Good numbers from the US tonight could just bring the dollar out of its doldrums and punish the Australian. I prefer to sell rallies.
Happy Friday and all trading. We have a long weekend ahead in Australia (Monday, Queen’s birthday). Good luck.