Market Drivers June 09, 2015

Chinese CPI data cool prompting calls for PBOC easing
UK Trade Balance better than forecast
Nikkei -1.76% Europe -0.14%
Oil $59/bbl
Gold $1175/oz.

Europe and Asia:
CNY CPI 1.2% vs. 1.3%
AUD NAB Business confidence 7 vs. 3
GBP UK Trade Balance -8.5B vs. 10B

North America:
USD Small Business Index 09:00


USD Wholesale Inventories

It’s been a rangebound session of trade in the currency market with the dollar recouping some of it losses from yesterday as both EUR/USD and commodity currencies slipped from their highs but the greenback remained weak against the yen with USD/JPY trading to a low fo 124.08 before finally rebounding a bit.

In Asian session trade the Chinese CPI data come in softer than expected at 1.2% versus 1.3% prompting speculation that PBOC will begin to ease relatively soon. Taken together with yesterday’s trade data which showed a steep fall in imports, the news out of China suggests that demand has clearly slowed and may remain muted for the rest of the year.

The Aussie initially jumped on the weak inflation data as well as upbeat NAB Business confidence figures, but the pair eventually drifted lower hitting 7646 before finding a modicum of support. A report by Goldman Sachs that called for further weakening of iron ore prices, weighed on the pair as the investment bank argued that consolidation in the sector was inevitable. Given the slowdown in Chinese consumer demand it’s hard to imagine how GS could be wrong over the medium term horizon as capital spending in China appears to have peaked.

In UK the Trade balance data was better than expected with the deficit coming in at -8.6B versus -10.0 B eyed. Exports increased 4.8% while imports declined by the same amount. Overall it was the best reading in 13 months and helped lift cable above the 1.5300 level before general dollar strength pushed it lower once again.

In North American trade the calendar is once again very light with only JOLTS and Wholesale inventories on the docket. The main newsflow continues to be the Greek negotiations with Euro group, but progress remains elusive and FX is likely to be driven by equity and fixed income flows for the rest of the day. As we noted yesterday, after massive volatility last week this promises to be week of consolidation and rangebound trading is likely to continue.

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