Morning brief for June 21

Morning brief for June 21

These last two days passed without any key data releases, but with more UK political uncertainty (the UK government is still not formed), an extremely dovish Mark Carney overlaid with a significant downfall in oil prices.

The yen was the Constant Tin Soldier in the Asian session as it managed to fight the beefy USD. USD/JPY fell below 111.30 earlier today. The news about the recent North Korean missile test contributed to the JPY strengthening.

The British pound dropped to 1.2600 yesterday after BoE Governor Carney signaled that he is in no hurry to raise rates, putting a special emphasis on the weakness the British economy might further experience in the course of Brexit negotiations. While there are three MPC voters worrying about heightened inflation rates, Carney’s speech made market participants believe that the BoE will unlikely provide a rate hike by the end of this year. Tonight, we will continue to keep our focus on the GBP with the Queen’s speech to Parliament which is due at 11:30 GMT and the UK monthly public-sector net borrowing report.

The euro slumped to 1.1116 against the USD in the Asian session. The downward momentum is not as strong as USD Bulls would like it to be. A mixed set of Fed’s speeches made traders a little bit confused. Charles Evans and Robert Kaplan sounded dovish overnight. The former one said that he is getting very nervous in the light of a multi-month run of low inflation readings. Robert Kaplan said he needs more evidence that low inflation rates are temporary before enacting additional tightening measures.  Fed Chair Yellen and NY’s Bill Dudley were explicitly hawkish as they were speaking of current Fed’s monetary policy cycle.

We don’t expect significant moves from EUR/USD today as no significant economic releases are seen on the horizon. Perhaps, only one is worthy – the US existing home sales report which is out at 17:00 GMT+3. At the present moment, the pair is trading at 1.1130 – a little bit higher from yesterday’s low. There is ample room for further EUR weakness towards the solid support at 1.1105. A break below this level will allow us to target the lower ones – 1.1070. The immediate resistance can be found at 1.1155 but the euro will have to put a great deal of effort to break it.

Aussie fell to 0.7555. The outlook for AUD/USD is still neutral though. The pair will likely trade in the range of 0.7525 – 0.7630 in the short-term without any significant economic releases that could spur buying/selling of the AUD.

The kiwi has also lost a little ground against USD. NZD/USD fell to 0.7225 in the Asian session notwithstanding the fact that the yesterday’s Global Dairy Auction ended with almost no change in the dairy prices.

USD/CAD is trading much higher from the weekly opening level – at 1.3283 from 1.3212 – mainly due to falling oil prices. Brent oil futures slumped to $45.45 yesterday as investors lost their faith in OPEC’s capacity to reduce oil glut despite with unprecedented compliance with the output deal. The oil stockpiles in a number of importing country do not shrink significantly.

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