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Asia Roundup: Aussie at 1-week peak as business activity revives, greenback declines as U.S. Treasury yield ease on dovish Fed, Asian shares volatile – Friday, June 21st, 2019

Market Roundup

  • Trump pulls back from launch of military strikes on Iran after initial approval -NYT
     
  • Apple, Keurig Dr Pepper, Dollar Tree, Fitbit press U.S. to drop China tariff plan
     
  • EU aims to complete top jobs jigsaw puzzle on June 30
     
  • 'I Love Thee, China': North Korea woos Xi in lavish state visit
     
  • Then there were two: Johnson and Hunt fight for British PM job
     
  • Gold blasts past $1,400 as Fed rate cut signal wounds dollar, yields
     
  • Japan Jun Nikkei Mfg PMI Flash, 49.5, 49.8 prev
     
  • Japan May CPI, Core Nationwide YY, 0.8%, 0.8% f'cast, 0.9% prev
     
  • Australian business activity revives in early June-survey
     
  • U.S. muni bond funds post $856 mln in inflows-Lipper
     
  • Foreign CB US debt holdings +$16.321 bln to $3.477 tln June 19 week
     
  • Treasuries +$4.887 bln to $3.056 tln, agencies +$11.203 bln to $344.133 bln

Economic Data Ahead

  • (0315 ET/0715 GMT) France Jun Markit Mfg Flash PMI, 50.7 f'cast, 50.6 prev
     
  • (0315 ET/0715 GMT) France Jun Markit Comp Flash PMI, 51.2 f'cast, 51.2 prev
     
  • (0330 ET/0730 GMT) Germany Jun Markit Mfg Flash PMI, 44.5 f'cast, 44.3 prev
     
  • (0330 ET/0730 GMT) Germany Jun Markit comp Flash PMI, 52.5 f'cast, 52.6 prev
     
  • (0400 ET/0800 GMT) EZ Jun Markit Mfg Flash PMI, 48.0 f'cast, 47.7 prev
     
  • (0400 ET/0800 GMT) EZ Jun Markit Comp Flash PMI, 51.8 f'cast, 51.8 prev
     

Key Events Ahead

  • N/A Deutsche Bundesbank hosts fifth Annual Macroprudential Conference, in cooperation with De Nederlandsche Bank and Sveriges Riksbank in Frankfurt
     
  • N/A ECB's Mario Draghi participates at Euro Summit in Brussels, Belgium
     
  • (0330 ET/0730 GMT) Boston Fed issues President Eric Rosengren's remarks on causes of Japanese financial crisis of the late 1990s in Boston
     
  • (0830 ET/1230 GMT) BoE's Silvana Tenreyro speaks at Economic Policy Research Network Conference 2019 in Copenhagen
     
  • (0830 ET/1230 GMT) BoE's Martin Taylor speaks at 5th Annual Macroprudential Conference in Frankfurt
     
  • (1200 ET/1600 GMT) Cleveland Fed's Loretta Mester and Federal Reserve's Lael Brainard participate at “Fed Listens: Town Hall Discussion with Federal Reserve Leadership” in Cincinnati, Ohio
     
  • (1530 ET/1930 GMT) San Francisco Fed's Mary Daly hosts “Zip Code Economies” podcast launch in San Francisco
     

FX Beat

DXY: The dollar index plunged to a 2-week low, as data on Thursday showed factory activity in the mid-Atlantic region stalled in June, likely reflecting a recent escalation in trade tensions between the United States and China; and raising hopes for a cut in U.S. interest rates that may stimulate global growth. The greenback against a basket of currencies traded 0.05 percent down at 96.59, having touched a low of 96.50 earlier, its lowest since June 7. FxWirePro's Hourly Dollar Strength Index stood at -108.32 (Highly Bearish) by 0400 GMT.

EUR/USD: The euro steadied above the 1.1300 handle after Italy's Prime Minister Giuseppe Conte in a letter to European Union leaders stated that the country's state accounts are improving despite the slowing economy and do not warrant EU sanctions. The European currency traded 0.1 percent up at 1.1302, having touched a high of 1.1317 on Thursday, its highest since June 12. FxWirePro's Hourly Euro Strength Index stood at -3.63 (Neutral) by 0400 GMT. Investors’ attention will remain on a series of data from the Eurozone economies and EZ Markit flash PMI's, ahead of the U.S. Markit prelim PMI's, existing home sales and speeches by Fed's Clarida and Brainard. Immediate resistance is located at 1.1330 (June 10 High), a break above targets 1.1361 (March 19 High). On the downside, support is seen at 1.1268 (June 13 Low), a break below could drag it below 1.1226 (June 4 Low).

USD/JPY: The dollar plunged to a fresh 5-1/2 month low, as the trade war increased uncertainty over the U.S. economic outlook, prompting the Federal Reserve on Wednesday to signal it could cut interest rates by as much as half a percentage point over the rest of this year. The pair was trading 0.2 percent down at 107.09, having hit a low of 107.04 earlier, its lowest since Jan. 3. FxWirePro's Hourly Yen Strength Index stood at 44.88 (Neutral) by 0400 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. Markit prelim PMI's, existing home sales and speeches by Fed's Clarida and Brainard. Immediate resistance is located at 108.80 (June 11 High), a break above targets 109.08 (Jan. 8 High). On the downside, support is seen at 106.88 (Apr. 17, 2018), a break below could take it lower at 106.26 (Mar. 29, 2018).

GBP/USD: Sterling rallied, extending gains for the fourth straight session, after the Bank of England stroked a less dovish tone than other central banks, reiterating their message that rates would need to rise in a limited and gradual manner. The major traded 0.05 percent up at 1.2702, having hit a high of 1.2727 on Thursday, it’s highest since Jun. 12. FxWirePro's Hourly Sterling Strength Index stood at -12.68 (Neutral) 0400 GMT. Investors’ attention will remain on BoE quarterly bulletin, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2763 (June 7 High), a break above could take it near 1.2813 (May 21 High). On the downside, support is seen at 1.2628 (Jun. 20 Low), a break below targets 1.2580 (Jun. 14 Low). Against the euro, the pound was trading flat at 88.89 pence, having hit a high of 88.72 on Thursday, it’s highest since Jun. 7.

AUD/USD: The Australian dollar advanced to a fresh 1-week peak after a survey showed domestic businesses activity picked-up momentum this month with the service sector recording the fastest pace of growth in seven months. The Aussie trades 0.2 percent up at 0.6932, having hit a high of 0.6937 earlier, it’s highest since Jun. 13. FxWirePro's Hourly Aussie Strength Index stood at -13.21 (Neutral) by 0400 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6881 (May 24 Low), a break below targets 0.6831 (June 18 Low). On the upside, resistance is located at 0.6959 (May 14 High), a break above could take it near 0.6994 (June 6 High).

NZD/USD: The New Zealand dollar surged to a 10-day peak after China said it hoped U.S. officials would bring a problem-solving attitude to renewed trade talks in advance of a meeting between Presidents Donald Trump and Xi Jinping next week in Japan. The Kiwi trades 0.2 percent up at 0.6598, having touched a high of 0.6604, its highest level June 11. FxWirePro's Hourly Kiwi Strength Index was at -22.17 (Neutral) by 0400 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6619 (June 4 High), a break above could take it near 0.6644 (June 6 High). On the downside, support is seen at 0.6540 (May 27 Low), a break below could drag it below 0.6474 (Oct. 4 Low).

Equities Recap

Asian shares traded in a volatile market amid fresh worries about the Middle East, after Iran shot down a U.S. military drone, raising fears of a military confrontation between Tehran and Washington.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent.

Tokyo's Nikkei declined 0.9 percent to 21,252.98 points, Australia's S&P/ASX 200 index fell 0.7 percent to 6,644.10 points and South Korea's KOSPI tumbled 0.4 percent to 2,122.45 points.

Shanghai composite index rose 0.4 percent to 2,999.28 points, while CSI 300 index traded 0.05 percent down at 3,828.88 points.

Hong Kong’s Hang Seng traded 0.4 percent higher at 28,400.13 points. Taiwan shares added 0.2 percent to 10,803.77 points

Commodities Recap

Crude oil prices rose to 3-week highs amid tensions in the Middle East after Iran shot down a U.S. military drone and on hopes for a drop in U.S. interest rates that may stimulate global growth.  International benchmark Brent crude was trading 0.1 percent lower at $64.46 per barrel by 0435 GMT, having hit a high of $65.00 earlier, its highest since May 31. U.S. West Texas Intermediate was trading 0.3 percent down at $56.96 a barrel, after rising as high as $57.75 earlier, its highest since the May 30.

Gold prices advanced more than 1.5 percent, breaking above $1,400 for the first time since September 2013, as hints of a rate cut from the U.S. Federal Reserve dented the greenback demand. Spot gold was trading 1.2 percent up at $1,404.42 per ounce by 0439 GMT, having touched a high of $1,411.75, its highest since Sept. 4 2013. The metal is set to post its biggest weekly gain since the week ended April 29, 2016, and was also on track for its fifth consecutive weekly rise. U.S. gold futures rose 1 percent to $1,410.70 an ounce.

Treasuries Recap

The Japan's 10-year yield fell to a near three-year trough of minus 0.185 percent overnight.

The three-year Australian note was down 7 basis points at an all-time trough of 0.92 percent. The 10-year bond contract jumped 9 ticks for the week to an historic high of 98.7050.

The yields on two-year New Zealand government paper were at record lows of 1.125 percent. .

The Canadian government bond prices were lower across a steeper yield curve, with the two-year down 2.5 Canadian cents to yield 1.404 percent and the 10-year falling 29 Canadian cents to yield 1.454 percent.


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