The main mover on the day was GBP, reacting to comments from BoE governor Carney in his rescheduled Mansion House speech. He stated that UK interest rates would not be raised any time soon, citing ‘anaemic’ wage growth as the key factor. This reversed all and more of the rally in response to the vote split announced last week, where we saw 2 more MPC members joining the camp voting for an immediate hike.
Despite the revelations offering little fresh insight, cable slumped back down through 1.2700, and we are now pushing past the support zone at 1.2615-40. EUR/GBP has been pushed up through 0.8800 again, but will struggle above here with the single unit also looking heavy in the meantime. Looking to Wednesday, we have the May public sector borrowing stats for May, with the BoE’s Haldane speaking around midday.
EUR/USD has already breached the support zone from 1.1160-10, but a move on 1.1100 lower down is now threatening, with a modest revival in the USD. US Treasury yields have recovered to a modest degree, but we have little tier 1 data to back up some of the comments from the Fed chair last week, and more recently the NY Fed’s Dudley, who continue see the economy on an upward trajectory despite some of the data misses of late.
In line with this, USD/JPY is still well placed to challenge the offers sitting ahead of 112.00, and as we alluded to in the early commentary this morning, the day – and week – ahead is unlikely to see any major momentum developing in the interim. Buoyant equity markets are cause for support also, but there is a clear reluctance to push the carry trade aggressively from current levels.
In Japan, the BoJ minutes early on in Asia are followed up by Kuroda comments in very early London today, but the familiar narrative offers up little if any risk for JPY bears. The all industries activity index also due out.
Looking ahead, we have the RBNZ meeting late today, but in the meantime, NZD, along with AUD and CAD have given up some modest ground against the greenback, but remain largely better supported when considering some of the traditional drivers. We saw the GDT index falling in 0.8% after today’s auctions, with WMP down 3.3% - a little more than expected. NZD/USD saw a brief dip, but focus on the central bank at present.
For AUD in particular, domestic housing and debt levels thereon have been brought into light from the Moody’s downgrade of 4 of the country’s leading banks, elaborating on their reasoning by highlighting the exposure to certain ‘areas’ of mortgage lending.
For the CAD, it has hard to ignore the latest losses in oil price, where traders are looking at what is driving these latest moves. As has been the case for some time now, the concerns over the growing levels of US Shale production will and have continued to weigh on WTI, with brent flowing lower but at a slightly slower pace as the spread has widened to close to USD 3.00 in the last few days. Despite this, USD/CAD remains well contained in the mid 1.3200’s, with the rejection of 1.3300+ last week deterring aggressive buying and/or momentum at the highs (1.3284 today).
In Scandinavia, we had the manufacturing and consumer confidence indices out in Sweden, with the Norwegian unemployment rate out first thing.