FX News Today
- Stock market sentiment turned cautious again during the Asian session.
- EU leaders formally nominated IMF Head Christine Lagarde to head the ECB and replace Mario Draghi. Lagarde, is clearly a much more dovish option in comparison to Weidmann, who has been the leader of the hawks on the council.
- Lagarde’s nomination was enough for investors to price in even more easing and asset purchases, despite the fact that a Bloomberg report suggested that the majority of policy makers are not ready to make a move in July and prefer to wait for the updated forecasts in September. EGB futures have extended gains on the news.
- BoE’s Carney flags downside risks from trade. The BoE head repeated that the central bank sees the need for rate hikes if Brexit is smooth. He also added that markets are giving more weight to a no deal scenario and that the BoE will reassess Brexit and trade risks at the August meeting.
- The US’ threat of additional tariffs on European goods highlighted that geopolitical trade tensions are far from over.
- The private China services PMI slowed to a four month low in June, adding to signs that much of the damage has already been done.
- Nikkei and Hang Seng lost -0.72% and -0.26% respectively and the Shanghai Comp is down -0.86%.
- President Trump plans to nominate Christopher Waller and Judy Shelton to the Fed Board of Governors to fill the two vacancies.
- GER30 and UK100 futures are currently posting slight gains, underpinned also by easing hopes, while U.S. futures are in the red, after a largely weaker close in Asia.
Charts of the Day
- USDJPY has come under some pressure, dropping to 107.52. Modest risk-off conditions have weighed, while the sentiment boost seen after the US/China trade truce appears to have worn off, leaving the reality that it may well be quite some time before agreements are made, and tariffs come off. Until some progress is made, it appears USDJPY upside will be limited.
- XAUUSD rallied to 1437.68 high,, underpinned by easing hopes and by geopolitical trade tensions which clearly are far from over. Amid EU open Gold reversed slightly lower to 1421 area and it is currently consolidating above it. Support holds at 1421, 1413 and 1407.55. Resistance levels come at 1428.55, 1431.80 and 1440.
Main Macro Events Today
- United States – Independence Day – Early close at 13:00 GMT
- Services PMI (GBP, GMT 08:30) –The June Services PMI is seen stable at 51 m/m.
- Trade Balance (USD, GMT 12:30) – It is expected to widen in May to -$54.6 bln (median -$53.5 bln) from -$50.8 bln in April.
- ADP Employment Change (USD, GMT 13:15) – Employment change is seen spiking to 150k in the number of employed people in June, compared to the weak 27k reading seen last month.
- ISM Non-Manufacturing PMI (USD, GMT 14:00) – The ISM-NMI index is expected to fall to 56.0 in June from 56.9 in May and a 19-month low of 56.1 in March, versus a 13-year high of 60.8 in September.
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