FX at Stanstill as Saturday Summit Last Chance for Deal

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Market Drivers June 26, 2015

EUR holds steady as Saturday Summit appears key
Japanese data better all around
Nikkei -0.31% Europe -0.60%
Oil $59/bbl
Gold $1175/oz.

Europe and Asia:
NZD Trade 350M vs. -100M
JPY Household Spending 4.8% vs. 3.5%
EUR GE Import Prices -0.2% vs. 0.2%

North America:
USD Revised U of M 10:00

The FX markets remained at a virtual standstill for most of the Asian and European dealing as traders awaited further developments in the Greek negotiations with EU which would occur at special summit meeting scheduled for Saturday.

Meanwhile the lack of progress and the absence of any meaningful economic news spurred a light amount of profit taking in yen crosses and traders pared their risk exposure ahead of the weekend.

The economic calendar has been very slow this week and the final trading day was no different with only the a smattering of data of out Japan and Trade numbers from New Zealand hitting the screens. The Japanese economic news was actually quite good with Household spending up at 4.8% versus 3.6% eyed. The data suggests that the long dormant Japanese consumer is finally starting to open his purse springs as BOJ QE program appears to stoke demand.

This was the year over year rise in household spending since March of 2014 and if the numbers could maintain that momentum then the Japanese economy may finally see some sustained growth into the year end.

In New Zealand the Trade data printed better than expected at 350M versus -90M eyed as exports came in higher than expected and imports declined. The news suggests that the New Zealand economy may be more resilient than previously thought and that the lower currency may be helping to boost the terms of trade.

Ahead of the release the RBNZ tried to jawbone the unit lower, stating that the kiwi remains at an unsustainable level. That helped push the pair down to a low of 6860 but it held firm at those levels for most of Asian and European trade as better Trade numbers helped to support it.

After a very steep selloff of nearly 1000 points over the past several months the kiwi appears to have stabilized ahead of the 6800 level. The long term trend remains lower as the RBNZ is adamant in guiding the currency lower and will likely cut rates once again, but if the central bank decides to delay its easing program into late summer then the pair may find some support around this level and could stage a short covering rally up to the 7000 figure over the next few weeks.

Boris Schlossberg
Managing Director

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