$INR implied forward yields rise to the highest level since May 2017
Archives of “June 2019” month
rssNew British PM will be announced on 23 July
As confirmed by the Conservative party HQ
Boris Johnson remains odds-on to win the battle against Jeremy Hunt but it’s never over until the fat lady sings, especially in politics. But either way, both of them have made clear that there will be a decision on Brexit by 31 October – or at least that’s what they claim now – so expect markets to focus on that the minute that the race is over and done with.
Iran says fully prepared to tackle US sanctions but will not reveal its plans
Comments by Iran’s economy minister in reaction to US sanctions
I don’t think Iran has a lot of fighting powder to hit back at the US but they probably have mitigating actions to help alleviate pressure from the latest sanctions. The real fear is if they feel emboldened enough to take more military action as what we saw last week when they shot down a US drone over the Strait of Hormuz.
Either way, tensions between the two are likely to escalate further before they get any better in the coming days/weeks.
EUR/USD: Buyers still hunting for a firm break above 1.14
Price is continuing to sit just under the 1.1400 handle
It’s been a relatively quiet session for the pair so far with price action inching towards the lower side on the day under the 1.1400 handle. That said, the trading range remains narrow with price largely seen between 1.1385-00 in the past few hours.
For buyers, they are still searching for a firm break above the 1.1400 handle with minor resistance also seen around 1.1420. The bias and momentum continue to sit in their favour but markets may very well be in a wait-and-see mode ahead of the Trump-Xi meeting that will take place later on in the week.
Of note, there are also expiries resting at 1.1400 (€563 million) today, 1.1370-90 (€3.4 billion) tomorrow, and again at 1.1400 (€1.5 billion) on Thursday. If you factor that in alongside month-end and quarter-end flows, it could perhaps provide some draw in anchoring price action over the next few days amid market indecision.
That said, unless price starts to threaten a fall back below the 200-day MA (blue line) @ 1.1348 then buyers are still in control of the pair and technically look poised for a continued break higher from here.
German yields hits new record low as bond rally continues
10-year bund yields fall to a record low of -0.33%
No reprieve for yield-seekers in Europe as the bond rally continues to gather pace amid softer risk tone in markets today. 10-year bund yields just hit a record low of -0.33% as the free fall looks set to continue unless we hear of more optimistic signs from US-China trade talks later on in the week.
Nonetheless, this adds to more reason why gold remains a standout performer today and over the past few weeks.
US’ Bolton: All Iran has to do is ‘walk through that open door’ to enter negotiations
Comments by US national security adviser, John Bolton
The issue here is that so long as sanctions remain in place, Iran is adamant that they will not negotiate with the US. And that’s leading to rising tensions between the two countries as of late, particularly as Iran has shown that it is willing to strike back after shooting down a US drone last week.
Gold/SPX ratio
USD/JPY may extend drop to 104.00 by year-end – Mizuho
The firm says that the yen may extend gains as demand for haven assets rise
According to the firm’s senior Asian FX strategist, Ken Cheung, they expect USD/JPY to extend its fall towards 104.00 amid dollar strength peaking out while haven demand will help to boost the yen’s allure by the end of this year.
“We expect USD peaking out as rate cut cycle and heightening uncertainties over global recession risk and US-China trade war push safe havens like JPY higher. While the unwinding of long USD positioning before the Fed’s rate cut cycle continued to weigh on the dollar, heightening safe haven demand on JPY given G20 uncertainties and increasing geopolitical tensions in Iran sent USD/JPY below the 107.00 handle.”
A move towards 104.00 will see USD/JPY fall below the January flash crash low of 104.87 and would definitely bode ill for the BOJ in trying to maintain their goal towards hitting the ever-elusive 2% inflation target.
Reports Trump has considered ending post-war Japan defense pact
Bloomberg report, citing unnamed ‘people familiar’
- Trump has privately considered ending pact with Japan
- Regards accord with Japan as unfair
Yen has been on the rise in the morning in Tokyo today, down towards 107 as I post:
Trump has been niggling away at Japan on trade and currency matters. So far the differences have been papered over. This is a new front.
Trump will meet with Japan’s PM Abe Shinzo at the G20. This could be part of the softening up process for asking for more from Japan.
Trump to meet Putin, Xi, Modi, Merkel, and others at G20
A US official outlines who Trump will be having bilateral meetings with at the G20 later this week in Japan
- Putin – to discuss Iran, Ukraine, Middle East, Syria, arms control
- Indian PM Modi
- Saudi crown prince – to discuss escalation in tensions in Iran and threats to regional stability
- Turkey’s Erdogan
- Germany’s Merkel
And, of course (drumroll please), Chinese President Xi!
- opportunity to “maintain his engagement”
- see where China is on the trade dispute
- “The president is quite comfortable with any outcome”
- meeting with Xi likely to be on second day of G20 (details still to be confirmed)
Trump to also travel to Korea:
- no plans to meet with Kim Jong Un
