Introduction
Both AUD and NZD lost approx. 0.7% versus US Dollar and EUR, with Kiwi Dollar following its cousin after comments from RBA Governor Stevens. The central bank chief spoke in Sydney to weigh on AUD by mentioning that the inflation target in Australia was currently below target. Concerns were raised by Glenn Stevens regarding household debt too, leading AUD/USD to reach a low of .7167. The MSCI APAC Index moved lower by close to 0.7% overnight, with stock indices within individual nations in that region all falling too.
Asian Session
Citibank analysts note that retail investors have been notable buyers of AUD/JPY as leveraged names hit AUD/USD and NZD/USD. The cross-currency pair has still moved lower and trades below its 2016 average of 82.86, at 78.39 right now.
Bloomberg notes that Fed Funds Futures are indicating a benchmark interest rate rise in the states for the first time since March. The analysis correctly suggests that similar patterns are emerging in comparison to the market moves after the hike there in December; a strong USD and an equity sell-off.
WTI Crude Oil Futures trade at US$47.84 per barrel, a decline which has weighted upon Malaysian Ringgit. Malaysia is Asia’s only major net exporter of crude oil and as such has an economy impacted by demand. In the European emerging space, eyes are focused on a meeting in Turkey between President Erdogan and the PM-Designate Binali Yildrim.
The day ahead in Europe and NY
GDP figures have been released in Germany this morning and printed bang in line with expectations. EUR/CHF trades at 1.1100 after the aforementioned data release and also the publication of Swiss trade balance data. Further economic data will be released out of Germany in the form of the monthly ZEW survey. This will also print for the continent as a whole.
Elsewhere in Europe, the Swedish unemployment rate will be released at 08:30 BST. Interest rate decisions will take place in both Turkey and Hungary, with The Confederation of British Industry in the UK releases its Distributive Trades Survey at 11:00 BST with Sterling showing some resilience recently.
In the US later, new home sales figures will be published before the opening of equity markets, along with a manufacturing index for May from the Richmond Federal Reserve. Lastly, weekly info. regarding crude oil stocks will be released at 21:30 BST.
Spot
| Last | % since US Close | High | Low | |
| EURUSD | 1.1203 | -0.15 | 1.1227 | 1.12 |
| USDJPY | 109.39 | -0.15 | 109.46 | 109.17 |
| GBPUSD | 1.4484 | 0 | 1.45 | 1.4474 |
| AUDUSD | 0.7167 | -0.74 | 0.7228 | 0.7167 |
| NZDUSD | 0.6713 | -0.73 | 0.6768 | 0.6713 |
| USDCHF | 0.9906 | -0.12 | 0.9915 | 0.9891 |
| EURGBP | 0.7735 | 0.13 | 0.7751 | 0.7731 |
| EURCHF | 1.11 | 0.16 | 1.1113 | 1.0944 |
| USDCAD | 1.3179 | -0.27 | 1.3186 | 1.3138 |
| USDCNH | 6.5641 | -0.04 | 6.5693 | 6.5607 |
FXO
Gamma is lower, largely across the board. In the EUR/USD space, one week and two week strikes have stark difference in volatilities, since the two week date contains a speech by Janet Yellen.
The two month Cable 25-delta risk reversal is trading with a volatility differential of 5.5% for the downside. This shows how the market is protecting itself for a potential move lower, despite the fact that spot has been firmer and the polls show an increased chance of a resulting vote to remain. Essentially, should the referendum result in a decision to leave, the move in spot would be significantly more dramatic, so more protection is required in this event, however less likely it may be.
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