From Patrick Bennett on RBA: Seeing quite a lot of comment about RBA ‘re-introducing’ an easing bias. I am not sure what has materially changed since last meeting, yes global growth is still soft and we have had Brexit, but domestic conditions look the same as previous.
Our trader Sam agrees as well. Sam said market is pricing 2bps of a cut for today’s meeting. He thinks market participants are looking for an explicit easing bias however does not think we will see one. RBA Governor Stevens will be waiting to see the fallout from Brexit, but more importantly what the Q2 CPI number is released later this month on the 27th of July. Sam likens selling AudUsd if this pops 30-50 pips and is short AudNzd.
Sam noted there has been a bit of chatter of macro-prudential measures being introduced in NZ on the wires from PM Key this morning. We need to be wary of the RBNZ speech on Thursday this week by Deputy Gov G Spencer on ‘macro-prudential policy and housing market risk’.
Both Euro and Gbp weakened on back of Jpy-cross. EurUsd, which ended American session in the 1.1150’s slipped down to 1.1126. Downside bids are said to be near 1.1110 and the 200-Day MA is at 1.1095. Of late the Italian banks have been getting some bad press. WSJ warned that the coming months promise to be tumultuous for Italian banks. The European Banking Authority will conduct stress tests of banks by the end of July and could single out some as having insufficient capital buffers.
GbpUsd is now locked in tight range. Bids are temporarily supporting the Cable at 1.3210-20 while offer atop 1.3350. Our trader Sam highlighted that since Mark Carney talked about rate cuts last week, GbpUsd has not been able to break above 1.3350. There is a huge Gbp option expiring today NY cut, strike at 1.3500. Notional of about Gbp1.5bn. An EurUsd option rolls off on Thursday strike at 1.1200 worth Eur2.2bn.
Lower Aussie along with weak oil futures this morning and UsdCad traded higher from where Toronto close 1.2850. Offers above 1.2900 and there are stop sell orders lurking beneath 1.2805.
Looked like good selling in Silver futures at the Shanghai open and pretty aggressive too. Without any news, the spot fell from 20.23 to 19.60. This dragged the spot Gold from 1351 to 1339.0.
Chinese Yuan fixed at 6.6594, in line with consensus but USDCNH is bid since the Tokyo open. Offshore spot kicked off from 6.6748 and hasn’t looked back since breaching 6.6790. Most of the buying came out of Taiwan.
China Caixin June services PMI rose to 52.7 but composite slipped little to 50.3 from 50.5.
Like USDCNH, the Usd/Asia is bid this morning.
First to rise was UsdThb. The pair started from 35.05, we suspect demand was from a large Thai corporate, linked to an M/A. Later in the morning, Bloomberg reported that Bank of Thailand is to further ease rules on bank outflows. This should keep UsdThb supported.