Weekly Market Update 19/06/16-24/06/16
The US dollar last week only managed to gain ground against the Canadian dollar and the Kiwi dollar among the major group of currencies. UsdCad rose 117 pips to 1.2889 (+0.91% weekly) and NzdUsd slid 6 pips to 0.7044 (-0.09% weekly). The Japanese Yen soared across the board as risk reversal trades linked to weakness in global equities dragged down UsdJpy for 7 consecutive trading sessions. The Bank of Japan is not as dovish as the financial community expects and portfolio managers disappointment was translated on a fresh 2016 low of UsdJpy and the Nikkei225 index fell 4.5% weekly. UsdJpy lost 283 pips to 104.08 (-2.72% weekly) and GbpJpy lost 292 pips to 149.41 (-1.92% weekly), outperforming UsdJpy thanks to the gains made by the British Pound on Thursday and on Friday. On those 2 days the “Leave” campaign was suspended after the murder of the British Labour Party politician Jo Cox. GbpUsd managed to stay above its 2016 low reached last February and closed at 1.4347 (+0.67% weekly), up 96 pips. The shared currency also lost against the British Pound as 0.80 level in EurGbp is seen as a relevant psychological resistance. The rate closed at 0.7848 (-0.48% weekly), down 38 pips. The Swiss Franc gained against the US dollar for the third consecutive week as negative deposit rates in Switzerland are not devaluing the Swiss Franc thus the SNB probably will do some proprietary trading activity if the Swiss Franc would reach a level that would not place Jordan in a comfortable zone. UsdChf closed at 0.9599 (-0.47% weekly), down 45 pips. The Aussie dollar outperformed the Kiwi dollar when compared against the Greenback: AudUsd rose 23 pips to 0.7395 (+0.32% weekly). The Euro made a bullish spike against the US dollar last Thursday and probably this technical price activity explain underlying conditions of a FED that will be very prudent in rising rates. Last Wednesday the Federal Reserve kept rates unchanged and if a Brexit would materialize is very likely that a rate hike won`t occur even next month if global growth would not decrease and market volatility will remain.
Below the current level it would be possible to see a 25 basis point increase in December. All Bank of England Monetary Policy Committee agreed to keep unchanged rates last Thursday. In the Minutes released by the BOE there are mentioned some measures that the institution will adopt to protect financial markets if markets will panic in case of Brexit. The coordination with foreign Central Banks is essential to guarantee temporary success in intervention on the currency market. One example is coordinated intervention to stabilize the Japanese Yen just after the Fukushima disaster the 11 March 2011.Global indices were weak and the S&P500 lost 1.32% weekly and it was underperformed by both DAX and Nikkei225. Gold rebounded and intraweek made a new 2016 top but could not manage to close on a new high. The shiny metal closed at 1,298.54 (+2.01% weekly) and would be possible to see another bullish wave of Gold if market sentiment on equities and energy commodities as well will decrease. Crude Oil lost 1.49% weekly after 2 weeks ago was reached a 2016 top and profit taking materialized. The commodity gained 10.12% YTD, much less than Gold , 22.25% YTD, but Crude Oil prices rose more than 80% from the 2016 low reached last January. On Monday the Bank of Japan will release the Monetary Policy Meeting Minutes at 23:50 GMT and then on Tuesday will be the turn of the Reserve Bank of Australia Meeting Minutes at 01:30 GTM. The European session will kick off with the Swiss Trade Balance at 06:00 GMT and then FED`s Yellen will testifies before the Congress at 14:00 GMT, where she will explain the current policies, economic situation and tools with which to improve it. On Wednesday the Non Monetary policy`s ECB Meeting at 07:00 GMT and during the session will be released the ECB Targeted LTRO, a measure of long term refinancing operation made by the ECB to Eurozone banks. At 14:00 GMT Janet Yellen testifies before the congress on the second day of the Semiannual Monetary Policy Report to the Congress. At 14:30 GMT EIA Crude Oil Stocks Change data. On Thursday will be held in UK the EU Referendum, and polling station will be opened between 6 GMT to 10 GMT. The national declaration of the referendum result will take place on Friday June 24. This will be the most important event in the economic calendar, and the US Baker Hughes US Oil Rig Count at 17:00 GMT will be the last event.
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