Market Drivers June 08, 2015

EUR runs to 1178 on Obama comments on USD but quickly reverses when they are denied
Chinese Trade shows sharp decline in imports
Nikkei -0.02% Europe -0.66%
Oil $59/bbl
Gold $1173/oz.

Europe and Asia:
JPY Final GDP 1.0% vs. 0.7%
CNY Trade 59.6B vs. 44.9B

North America:
CAD Building Permits 08:30

CAD Ivey 10:00

FX seesawed on the first trading day of the week producing much heat but little light as prices essentially went nowhere with dollar first dipping sharply on reports that President Obama said dollar strength was a problem, only to quickly reverse course when the White House denied any such statement.

The euro spiked to a high of 1.1178 on reports quoting a French official that President Obama said the strong dollar was a problem at the G-7 meeting, Major pairs quickly moved higher as the buck tumbled on fears that the Obama administration may pressure the Fed on keeping rate at zero bound for a while longer.

However the White House quickly denied the statement, noting that, “The President did not state that the strong dollar was a problem. He made a point that he has made previously, a number of times: that global demand is too weak and that G7 countries need to use all policy instruments, including fiscal policy as well as structural reforms and monetary policy to promote growth”. The buck quickly regained bid and EUR/USD returned to the lower part of the day’s range trading near the 1.1100 level.

It’s unclear whether the story from G-7 was simply a matter miscommunication with words getting lost in translation, or whether the White House quickly backpedaled from their statement once they realized its full implication. In either case it just introduced a fresh dose of doubt into the market and provided an excuse for some post NFP profit taking to occur.

Elsewhere in Asia the the Chinese trade data was the only major release of the night with surplus printing at 59.5B versus 44.9B eyed. However the headline figure hid a very steep -17% decline in imports which suggests that demand in China is slowing materially. Several analysts predicted that the new set of numbers will force the PBOC to ease further perhaps lowering the RRR rate in the foreseeable future.

With no US data on the docket today may well be a day of consolidation with commdollars performing especially well, both on the idea that PBOC may ease and on the notion that US may delay rate hikes despite strong data, making their Aussie and kiwi yields that much more attractive in the market for the time being.

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