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Major currencies still caught in that pre-NFP lull

FX 07-01Elsewhere, equities are also looking fairly tentative while Treasury yields are little changed. This is shaping up to be a typical placeholder session awaiting the US jobs report later in the day.

Going back to FX, EUR/USD is still caught around 1.1300 with large expiries holding close to the figure level today. Meanwhile, USD/JPY is also still toying with a potential break of 116.00 as buyers seek validation from the key risk event later. GBP/USD is holding just below its 100-day moving average at 1.3552 but above its key hourly moving averages at 1.3497-20.

As for commodity currencies, AUD/USD is pinned down around 0.7150-60 as sellers stay in near-term control in the hunt towards 0.7100. Large expiries at 0.7160 and 0.7200 are ones to take note of for today.

Dollar builds on hawkish Fed tone from yesterday

The hawkish Fed tone from yesterday is helping to pin down risk assets and the dollar is extending gains against the commodity currencies for the most part today. AUD/USD is down 0.9% to 0.7157 as price looks towards 0.7100 next:AUDUSD D1 06-01

Meanwhile, we’re also seeing EUR/USD fall to a low of 1.1285 on the day and GBP/USD falling further to 1.3505 after failing to breach resistance from the 100-day moving average and 61.8 retracement level:

Despite the dollar’s advance, we are actually seeing equities pare some of its earlier losses. S&P 500 futures and Dow futures are now flat, but it is a bit early to call for dip buyers to prevail.

I still reckon we could see risk trades keep more pressured, especially if bond yields threaten to push higher. For now, 10-year Treasury yields are up 2.2 bps to 1.725% but facing resistance at 1.75% to 1.79% as outlined here.

Either way, it is tough to bet against the dollar so long as the Fed continues to play ball and risk trades are looking vulnerable. If anything else, the move so far this week could have more legs if the US non-farm payrolls release tomorrow vindicates the Fed in going with a quicker balance sheet runoff.

:: The FX rate difference is to be calculated between TRY deposit account open/close dates; the rate will be announced every day at 08:00GMT/03:00EST by the CBRT. This boils down to ‘guaranteed saving bonds’ – Though how “guaranteed” they are is anyone guess. It’s certainly not the bazooka that is needed to fix the Turkish monetary woes. The Lira hasn’t budged on the announcement, but it’s hard to imagine that Mr Market will see this as enough to quell the TRY weakness for long. Lira coiled

The Turkish Finance Ministry has announced their new measure (singular):

:: New deposit instrument to be used by individual investors, the minimum interest rate will be CBRT rate. In maturities of 3, 6, 9 and 12-months. If the FX change is above the CBRT rate, the difference will be paid in TRY to accounts.

:: The FX rate difference is to be calculated between TRY deposit account open/close dates; the rate will be announced every day at 08:00GMT/03:00EST by the CBRT.

This boils down to ‘guaranteed saving bonds’ – Though how “guaranteed” they are is anyone guess.

It’s certainly not the bazooka that is needed to fix the Turkish monetary woes.

The Lira hasn’t budged on the announcement, but it’s hard to imagine that Mr Market will see this as enough to quell the TRY weakness for long.

Lira coiled
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