FX Today: Yen, Gold rally on mounting US-Iran geopolitical risks; eyes on Powell
Risk sentiment was hit in Asia this Tuesday, as the ongoing US-Iran geopolitical tensions flared up and boosted the safe-havens, the Yen, Gold and the Swiss Franc. The US-Iran conflict escalated after the Iranian Foreign Ministry Spokesman responded to the US President Trump’s fresh sanction on Iran, citing that the new US new sanctions mean diplomatic path is closed 'forever'. Moreover, increased odds of a US-China trade deal reached at the G20 Summit this weekend and dovish Fed rate expectations also continued to weigh on the investors’ sentiment.
The top gainer this session, however, was the higher-yielding New Zealand dollar that surged on upbeat NZ trade report, having driven the NZD/USD pair through the 0.6650 barrier. The Yen also turned higher amid risk-off action in the Asian equities and negative Treasury yields that dragged the USD/JPY pair to fresh 5.5-month lows near 107.75 region. Meanwhile, the AUD/USD pair managed to find some support from the gold-price rally and broad USD weakness. Gold prices on Comex hit fresh 6-year highs and clinched the 1440 level. Oil prices, on the other hand, fell nearly 1%, with WTI hovering below 57.50 and Brent around 63.60 region. The USD/CAD pair traded modestly flat below the 1.32 handle, with the upside looking more compelling amid weaker oil prices.
Among the European currencies, both the EUR/USD pair and the Cable benefited from the ongoing US dollar softness while the GBP markets paid little heed to the UK PM Candidate Johnson’s no-deal Brexit threats.
Main Topics in Asia
New Zealand FinMin Robertson: OECD survey noted global risks
OECD Deputy Secretary-General: Trade tensions may slow Chinese economic growth
New Zealand trade shows a 264m surplus vs the expected 250m
Lighthizer spoke with the Chinese Vice Premier Liu
Bank Of Japan Meeting Minutes: Apr 24-25
China's Commerce Ministry: US and China trade teams have agreed to keep communication
Trump: Has power to remove Federal Reserve Chairman 'If I wanted to' - The Hill
China think tank calls for tougher stance in trade talks with US - SCMP
Brent technical analysis: Looks north after defense of key support
Gold: On its way to $ 1450 amid escalating US-Iran tensions, weaker USD
Gold hits fresh record high in AUD terms, up 9% on MTD basis
Leading Analyst: PBOC has room for a RRR cut - MNI's Barton
Sources: US President Trump said to have privately mused ending the post-war defense pact with Japan - Bloomberg
US and China trade talks set to resume - Xinhua
Japan’s Motegi: Will meet USTR Lighthizer this week
Asian stocks drop following losses on Wall Street
Iranian ForeignMin Spokesman: Latest US sanctions mean closing the channel of diplomacy forever
Key Focus Ahead
There is nothing much of note, in terms of economic data, in the EUR calendar today and hence, the focus will remain on the speech by the Reserve Bank of Australia’s (RBA) Assistant Governor (Financial System) Bullock at 0705 GMT and the European Central Bank (ECB) Vice President De Guindos speech at 0815 GMT for some fresh trading incentives while the development surrounding the US-Iran conflict and US-China trade talks will remain the main market drivers ahead of the G20 Summit later this week. At 1000 GMT, the UK CBI Realized Sales data will be reported, as the Pound continues to shrug-off the increased odds of a no-deal Brexit.
In the NA session, the Canadian wholesale sales data will drop in at 1230 GMT, followed by the US CB Consumer Confidence data due at 1400 GMT alongside the New Homes Sales release. The US macro news are likely to play second fiddle to the Federal Reserve (Fed) policymaker Bostic and Chair Powell’s speech scheduled at 1600 GMT and 1700 GMT respectively.
EUR/USD: Bid for fifth straight day ahead of Fed speak
EUR/USD is extending the four-day winning streak with markets offering US Dollars amid a rally in gold prices. Looking forward, EUR/USD's impending move toward 1.16, as called by technical charts, will likely gather pace if the Fed Chairman Powell reinforces rate cut expectations with dovish comments later today.
GBP/USD undermines increasing odds for hard-Brexit while aiming 50-day SMA
Even with the UK PM candidate Boris Johnson reiterating his pledge to leave the EU on October 31, the GBP/USD pair continues to trade on the front foot near 1.2750 heading into the London open on Tuesday.
US Conference Board Consumer Confidence Preview: Employment sustains optimism
The Consumer Confidence Index is predicted to fall to 131.2 in June from 134.1 in May. The Present Situation Index in May was 175.2 up from 169.0 in April. The Expectations Index rose to 106.6 in May from 102.7 the prior month.
Reserve Bank of New Zealand Cash Rate Decision Preview: once is not enough
The RBNZ is widely expected to maintain its current cash rate of 1.50% after reducing its base rate by 0.25% at the May meeting. A July cut is fully priced into the markets.