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Asia Roundup: Antipodeans gain on prospects of U.S. rate cut, yen rallies against dollar amid growing geopolitical tension, Asian shares plunge – Tuesday, June 25th, 2019

Market Roundup

  • Trump 'comfortable with any outcome' from pivotal Xi talks -official
     
  • China, U.S. trade officials talk ahead of Trump-Xi meeting
     
  • Iran says U.S. sanctions on Khamenei mean end of diplomacy – Tweet
     
  • Trump privately talks about ending Japan defense treaty – Bloomberg
  • Trump to visit S.Korea as Pompeo raises hope for new N.Korea talks after letter
     
  • In Bahrain, U.S. to launch economic part of Mideast peace plan amid skepticism
     
  • BOJ debated cost of easing in clarifying rate guidance – April meeting minutes
     
  • Boris Johnson says he is serious about 'no-deal' Brexit threat
     
  • Fed's Kaplan: wise to wait before any change to rates
     
  • China to launch first yuan bonds in Macau
     
  • New Zealand May Trade Balance, 264.0 mln, 433.0 mln prev, 383.0 mln r'vsd
     

Economic Data Ahead

  • (0500 ET/1000 GMT) UK Jun CBI Distributive Trades, -10 f'cast, -27 prev

Key Events Ahead

  • N/A Russia's central bank monetary policy chief, Alexei Zabotkin, to speak at Duma in Moscow
     
  • (0305 ET/0705 GMT) RBA's Michele Bullock speaks on “Modernising the Australian Payments System” at the Central Bank Payments Conference in Berlin
     
  • (0315 ET/0715 GMT) ECB's Luis de Guindos speaks at ABI Annual Convention “Supervision, Risks and Profitability 2019” organised by the Italian Banking Association in Rome
     
  • (0830 ET/1230 GMT) Philadelphia Fed issues Nonmanufacturing Business Outlook Survey for June in Philadelphia
     
  • (0845 ET/1245 GMT) New York Fed's John Williams gives welcome remarks before the Open Finance Forum organized by Open Finance NYC and Bloomberg in New York
     
  • (1200 ET/1600 GMT) Atlanta Fed's Raphael Bostic participates in panel on “Housing” before the Harvard University Joint Center for Housing Studies' “The State of the Nation's Housing 2019,” in Atlanta
     
  • (1300 ET/1700 GMT) Fed's Jerome Powell speaks at “C. Peter McColough Series on International Economics: A Conversation with Jerome H. Powell,” in New York
     
  • (1315 ET/1715 GMT) ECB's Benoit Coeure gives opening remarks at a dinner with the International Swaps and Derivatives Association's (ISDA) Board of Directors and senior staff in Frankfurt
     
  • (1530 ET/1930 GMT) Richmond Fed's Tom Barkin takes part in a discussion at the University of Ottawa's Institute of Fiscal Studies and Democracy
     

FX Beat

DXY: The dollar index declined to a 3-month low as the yields on 10-year Treasuries slumped 120 basis points, its lowest since November. The greenback against a basket of currencies traded 0.1 percent down at 95.94, having touched a low of 95.84 earlier, its lowest since Mar. 21. FxWirePro's Hourly Dollar Strength Index stood at -33.37 (Neutral) by 0600 GMT.

EUR/USD: The euro rallied to a 3-month peak, as the greenback eased after the U.S. Federal Reserve last week signalled it would cut interest rates before year-end. The European currency traded 0.05 percent up at 1.1397, having touched a high of 1.1412 earlier, its highest since Mar. 21. FxWirePro's Hourly Euro Strength Index stood at 47.30 (Neutral) by 0600 GMT. Investors’ attention will remain on ECB De Guindos' speech, ahead of the U.S. consumer confidence, new home sales and speeches by Fed officials. Immediate resistance is located at 1.1437 (Mar. 21 High), a break above targets 1.1474 (Dec. 21 High). On the downside, support is seen at 1.1345 (Feb 26 Low), a break below could drag it below 1.1301 (Jun. 11 Low).

USD/JPY: The dollar plunged to a near 6-month low amid growing prospects of monetary easing by the Federal Reserve and fresh worries about the Middle East, after Iran shot down a U.S. military drone. The pair was trading 0.3 percent down at 106.99, having hit a low of 106.78 earlier, its lowest since Jan. 3. FxWirePro's Hourly Yen Strength Index stood at -54.42 (Bearish) by 0600 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. consumer confidence, new home sales and speeches by Fed officials. Immediate resistance is located at 107.53 (38.2% retracement of 108.72 and 106.78), a break above targets 107.98 (61.8% retracement). On the downside, support is seen at 106.26 (Mar. 29, 2018), a break below could take it lower at 106.00.

GBP/USD: Sterling consolidated near a 1-month peak recorded in the previous session, as investors were reluctant to take big positions until the conclusion of the Conservative Party leadership contest.  The major traded 0.1 percent up at 1.2751, having hit a high of 1.2766 on Monday, it’s highest since May 21. FxWirePro's Hourly Sterling Strength Index stood at 0.17 (Neutral) 0600 GMT. Investors’ attention will remain on the UK CBI distributive trades survey, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2798 (May 17 High), a break above could take it near 1.2853 (May 16 High). On the downside, support is seen at 1.2681 (Jun. 12 Low), a break below targets 1.2628 (Jun. 20 Low). Against the euro, the pound was trading 0.1 percent down at 89.39 pence, having hit a high of 88.72 on Thursday, it’s highest since Jun. 7.

AUD/USD; The Australian dollar surged to a 2-week peak, as the greenback weakened on expectations for an aggressive cut in interest rates by the Federal Reserve next month. The Aussie trades 0.05 percent up at 0.6960, having hit a high of 0.6972 earlier, it’s highest since Jun. 10. FxWirePro's Hourly Aussie Strength Index stood at 46.82 (Neutral) by 0600 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6925 (June 12 Low), a break below targets 0.6881 (May 24 Low). On the upside, resistance is located at 0.6994 (June 6 High), a break above could take it near 0.7022 (June 7 High).

NZD/USD: The New Zealand dollar advanced, extending gains for the sixth straight session, ahead of the Reserve Bank of New Zealand policy meeting, where it is expected to reiterate the dovish sentiments of other central banks. The Kiwi trades 0.3 percent up at 0.6641, having touched a high of 0.6608, its highest level June 10. FxWirePro's Hourly Kiwi Strength Index was at 4.16 (Neutral) by 0600 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6681 (June 7 High), a break above could take it near 0.7729 (Apr. 18 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 tumbled as investors waited to see whether Trump and Chinese President Xi Jinping would at least call a truce in their trade war when they meet at the G20 summit in Osaka late this week.

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

Tokyo's Nikkei plunged 0.4 percent to 21,193.81 points, Australia's S&P/ASX 200 index tumbled 0.1 percent to 6,658.00 points and South Korea's KOSPI slumped 0.3 percent to 2,121.11 points.

Shanghai composite index declined 0.8 percent to 2,984.25 points, while CSI 300 index traded 0.9 percent down at 3,804.05 points.

Hong Kong’s Hang Seng traded 1.3 percent lower at 28,140.82 points. Taiwan shares shed 0.7 percent to 10,706.72 points

Commodities Recap

Crude oil declined amid concerns over the outlook for crude demand, although the downside was limited after Washington announced new sanctions on Iran amid mounting tensions in the Middle East.  International benchmark Brent crude was trading 0.7 percent higher at $64.30 per barrel by 0523 GMT, having hit a high of $65.74 on Friday, its highest since May 31. U.S. West Texas Intermediate was trading 0.7 percent down at $57.31 a barrel, after rising as high as $58.20 on Monday, its highest since the May 30.

Gold prices surged more than 1 percent to their highest level in 6-years as the dollar weakened on prospects of monetary easing by the Federal Reserve, while simmering U.S.-Iran tensions boosted the safe-havens demand. Spot gold was trading 0.8 percent at $1,430.90 per ounce by 0528 GMT, having touched a high of $1,439.14 on Friday, its highest since May 14, 2013; and is headed for a sixth consecutive session of gains. U.S. gold futures jumped 1.6 percent to $1,440.20 an ounce

Treasuries Recap

The Japanese government bond prices rose, with the benchmark 10-year JGB futures rising 0.12 point to 153.94. The 10-year JGB yield fell 1.5 basis points to minus 0.170 percent.  The 20-year JGB yield also declined by 1.5 basis points, to 0.200 percent.  The 30-year JGB yield fell by 2.5 basis points to 0.320 percent. 

The Australian government bond futures were mostly flat, with the 3-year and the 10-year bond contracts up half a tick at 99.140 and 98.705 respectively.

The New Zealand government bonds were barely moved.

The Canadian government bond prices were higher across the yield curve. The two-year rose 4.5 Canadian cents to yield 1.409 percent and the 10-year was up 24 Canadian cents to yield 1.459 percent. The gap between Canada's two-year yield and its U.S. equivalent narrowed by 1.8 basis points to a spread of 32.8 basis points in favor of the U.S. bond.


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