Market Drivers June 14, 2016

German 10 year bund turns negative
UK CPI cooler
Nikkei -1.00% Dax -1.50%
Oil $48/bbl
Gold $1282/oz.

Europe and Asia:
AUD NAB Business Confidence 3 vs. 5
GBP CPI 0.3% vs. 0.4%
EUR IP 1.1% vs. 0.7%

North America:
USD Retail Sales 8:30
USD Business Inventories 10:00

Another day of risk off flows pushed the dollar higher against all the majors with the exception of yen which once again flirted with yearly highs in Asian and early European trade.

With both Nikkei and DAX lower by more than 1% risk off continued to be theme of the day in currency markets as even the benchmark 10 year bund slipped into negative yield territory for the first time ever. The EUR/USD followed suit dropping to a low of 1.1220 in morning European dealing before finding a modicum of support.

The uncertainty surrounding the Brexit vote has investors on edge, although cable itself was relatively quiet holding above the 1.4100 figure for the time being. In economic news UK CPI came in a bit cooler than expected at 0.3% versus 0.4% eyed but the report was almost instantly ignored as the focus remains on politics rather than economics.

In Eurozone, both Industrial Production and employment data printed better than expected with former coming in at 1.1% vs. 0.7% eyed while the latter was at 0.3% vs. 0.2% forecast. The euro however could find no support as EUR/JPY sales continued to weigh on the unit. If North American trade extends the selloff in equities EUR/USD could breach the 1.1200 figure with ease.

The key focus in FX however will be on USD/JPY. The pair continues to hover near the very important yearly lows of 105.50 and a break there could trigger a stampede of stops that could quickly send the pair towards the 105.00 level. One possible offset to that move could be the US Retail Sales figures due at 12:30 GMT. The market is looking for a pullback to 0.4% from last month’s 0.8% print. But if the consumer surprises to the upside it would indicate a second strong month of final demand and may allay some of the market fears about an economic slowdown. If however, Retail Sales miss USD/JPY will most likely drop to fresh yearly lows and could quickly move towards the 105.00 level as markets rule out any chance of a rate hike this summer.

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