19 Jun: Dovish Draghi; Upbeat Trump provide some volatility ahead of today’s FOMC Meeting.

By | June 19, 2019

The European session got under way with some dovish comments from ECB President Mario Draghi which seemed to surprise traders and sent the sent Euro sharply lower, and with the German 10-year yield also heading to a new record low. The Euro has since recovered some of those losses as the US$ came under some profit taking selling pressure, ahead of today’s FOMC Meeting. The other big event of the day took place in the US session and came about following comments from Donald Trump, who confirmed that he has had a good conversation with Chinese President, Xi, and will have an extended meeting him at the upcoming G20 on 28 June. This sent stocks sharply higher, with the main US indices finishing the day up by around 1%-1.4%. The announcement also did no harm to the commodity currencies (Aud, Nzd, Cad) which all recovered some of their lost ground, placing the US$ under added pressure. Note also that UsdCnh has fallen sharply on the news, with the CNH making some decent gains on the back of Trump’s comments, currently trading at 6.9000, down from the day’s high of 6.9396.

In other FX news, Sterling squeezed a little higher, from a five-month low, after Boris Johnson was confirmed as the frontrunner to become Britain’s next prime minister following a televised debate between the leadership candidates, on Tuesday.

In other markets, WTI made some decent gains, up by 4% on the improving hopes of some positive US/China trade talks as well as hopes of a Fed rate cut later today. The metals were also higher, for much the same reason and we now await the Fed to provide the next directional move.

Looking ahead, Wednesday gets under way with the NZ Q1 Current Account (exp +$0.525bio), although there is then not too much to come ahead of the German May PPI (exp 0.2%mm, 1.2%yy) and the UK May CPI, PPI, RPI (CPI, exp 0.3%mm, 2.0%yy; Core CPI, exp 1.7%yy). The markets though are likely to stay pretty unresponsive to any data that come ahead of the FOMC decision/projections/statement and Press Conference from Fed Chair, Powell. While rates are expected to stay on hold in June, but with trade tensions looking likely to escalate, it would be of no surprise if the Fed hints at the probability that precautionary interest rate cuts are on their way, possibly as soon as July. There will also be plenty of ECB speakers today, including Draghi, but who probably did his damage yesterday.

Economic data highlights will include:

Wed: NZ Q1 Current Account, German PPI, EU Current Account, Construction Output, UK CPI, PPI, RPI, CBI Distributive Trade Survey, FOMC Meeting/Interest Rate Decision/Press Conference – J. Powell. Central Bank Speakers: J-C Juncker, ECB; Draghi, Lautenschlager, Coeure

Market moves, in brief:

FX: DXY 97.64 (+0.12%)

Bonds: US10Y; 2.059% (-1.98%), German 10Y; -0.32% (-30.10%), UK 10Y; 0.806% (-5.13%), Australian 10Y; 1.374% (-1.45%), NZ 10Y; 1.635% (-0.61 %), China 10Y; 3.254% (-0.55%)

Stock Indices: DJI; +1.35%, S+P; +0.97%, NASDAQ; +1.39%, EUStoxx50; +2.06%, FTSE100; +1.17%, Shanghai Composite; +0.09%,

Metals: Gold $1346 oz (+0.52%), Silver $15.00 oz (+1.12%), Copper $2.703 lb (+2.13%), Iron Ore $105.79 per tonne (NYMEX) (+1.56%),

Oil: WTI $ 54.10 pb (+4.2%)

EURUSD: 1.1194
Res  1.1225  1.1255  1.1290
Sup  1.1180  1.1150  1.1110
USDJPY: 108.44
Res  108.65  108.80  109.00
Sup  108.40  108.20  108.00
GBPUSD: 1.2556
Res  1.2570  1.2595  1.2620
Sup  1.2530  1.2505  1.2475
USDCHF: 0.9999
Res  1.0015  1.0030  1.0045
Sup  0.9985  0.9970  0.9955
AUDUSD: 0.6875
Res  0.6885  0.6900  0.6915
Sup  0.6865  0.6850  0.6830
NZDUSD: 0.6524
Res  0.6535  0.6550  0.6565
Sup  0.6510  0.6495  0.6480
S&P.fs: 2921.78
Res  2935.00  2945.00  2960.00
Sup  2910.00  2895.00  2880.00
DJ30.fs: 26497.00
Res  26570.00  26695.00  26825.00
Sup  26400.00  26280.00  26155.00
SPI200.fs: 6544
Res  6560  6575  6595
Sup  6530  6515  6500
XAUUSD: 1346.15
Res  1350.00  1355.00  1360.00
Sup  1340.00  1335.00  1330.00
XAGUSD: 15.00
Res  15.10  15.20  15.30
Sup  14.90  14.80  14.70
WTI.fs: 54.26
Res  54.85  56.00  57.35
Sup  53.45  52.15  50.70