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BoE Governor Market Carney emphasized in a BBC interview that in event of no-deal Brexit, tariffs will "automatically" apply with EU. This is in contradiction to Boris Johnson's claim that UK could use the so called "Gatt 24" rule to trade with EU under current terms. Carney also warned that no-deal, no-transition Brexit should be a choice taken with "absolute clarity".

Carney explained that "the Gatt rules are clear... Gatt 24 applies if you have a [withdrawal] agreement, not if you've decided not to have an agreement, or you have been unable to come to an agreement". And, "we should be clear that not having an agreement with the European Union would mean that there are tariffs, automatically, because the Europeans have to apply the same rules to us as they apply to everyone else."

Also, he noted around three quarters of UK businesses have already done as much as they could for no-deal Brexit preparation. However, he emphasized "it doesn't meant they are fully ready, in fact far from it".

General Trend:

• Nikkei Futures decline as USD/JPY weakens
• Shanghai rises and briefly trades above the 3,000 handle, IT shares outperform
• Australia’s Lynas Corp notes 40% price increase in 60 days for certain rare earths amid trade tensions
• More analysts see July RBA rate cut after Thursday’s speech by Gov Lowe, recently released RBA minutes
• Japan prelim Manufacturing PMI eased and remained in contraction in June
• Gold Futures rise above $1,400/oz (highest since 2013), US dollar remains weaker after recent Fed decision/forecasts
• US FAA comments on Iran threat, Brent rises in Asian trading
• China and US negotiating teams could meet as soon as Tues (June 25th) - Chinese press
• The G20 leaders meeting is due to be held in Osaka from June 28-29th (Friday-Saturday)
• The Reserve Bank of New Zealand (RBNZ) is due to hold its official cash rate (OCR) decision on June 26th (Wed)

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.1%
• (AU) Australia Jun Preliminary PMI Manufacturing 51.7 v 51.0 prior (highest level since March)
• (NZ) Westpac sees Reserve Bank of New Zealand (RBNZ) cutting rates in Aug to 1.25% (vs 1.50% currently)

China/Hong Kong

• Shanghai Composite opened +0.1%, Hang Seng +0.1%
• Shengjing Bank [2066.HK]: Evergrande Group to acquire 2.2B shares for CNY13.2B - US financial press
• (CN) China and US negotiating teams could meet as soon as Tues (June 25th) - Chinese press
• (HK) Hong Kong government's headquarters to be temporarily closed on Friday, protesters might hold rally today - US financial press
• (HK) Hong Kong activists block roadway; call for surrounding of Police HQ
• (CN) China PBoC Open Market Operation (OMO): Injects CNY30B in 14-day reverse repos v CNY30B prior; Net CNY30B injected v CNY30B injected prior
• (CN) China PBoC sets yuan reference rate: 6.8472 v 6.8805 prior (strongest fixing since mid-May)
• (CN) China volume weighted avg benchmark Overnight Repo rate hits 1.10% (4-year low) amid PBOC cash injections and easing speculation
• (CN) China Finance Ministry (MOF) sells 50 year bonds, yield 4.0% v 3.82% prior (3.93%e); bid to cover 1.56x v 3.10x prior

Japan

• Nikkei 225 opened +0.1%
• (JP) JAPAN MAY NATIONAL CPI Y/Y: 0.7% V 0.7%E; CPI EX FRESH FOOD (CORE) Y/Y: 0.8% V 0.7%
• (JP) Japan June Preliminary PMI Manufacturing: 49.5 v 49.8 prior (3-month low)

Korea

• Kospi opened flat
• (KR) South Korea Reports Jun 1-20 exports: -10% y/y; imports: -8.1% y/y; Semiconductor exports -24.3% y/y

North America

• (US) US Pres Trump reportedly approved Iran attacks only to pull back just hours later on Thursday night- NYT
• (US) FAA issues emergency order prohibiting all US flights from flying through Iranian controlled airspace above Gulf of Oman and Persian Gulf
• Caterpillar [CAT]: CEO says the company is 'comfortable' meeting its forecast despite tariffs; China is still strong of the company while Europe is flat and Latin America is starting to improve - CNBC
• (US) SEMI: May North America Billings: $2.06 v $1.91B prior, m/m: +7.4% v +4.7% prior; y/y: -23.6% v -29.0% prior

Europe

• (EU) EU leaders agree to hold another summit related to the EU's top jobs, including ECB head, on June 30th; no agreement was reached on Thursday - financial press
• (TR) EU Juncker: What Turkey is doing in territorial waters of Cyprus is unacceptable; Proposals against Turkey over the drilling will not be 'soft'

Levels as of 1:20 ET

• Nikkei 225, -1.1%, ASX 200 -0.7%, Hang Seng -0.5%; Shanghai Composite +0.3%; Kospi -0.5%
• Equity Futures: S&P500 -0.4%; Nasdaq100 -0.6%, Dax -0.6%; FTSE100 -1.4%
• EUR 1.1309-1.1288 ; JPY 107.37-107.04 ; AUD 0.6938-0.6916 ;NZD 0.6606-0.6576
• Gold +0.8% at $1,408/oz; Crude Oil -0.1% at $57.02/brl; Copper +0.1% at $2.713/lb

The EUR/AUD seems to be in a wave 5 (blue) at the moment. Price has reacted strongly to the 61.8% Fibonacci target of wave 5 vs 1+3 but price could push towards higher Fibs as long as price stays above the support line (blue) of the uptrend channel. The next push up, however, could complete the larger bullish swing (wave C purple) and start a new downtrend.

The EUR/AUD showed a strong bearish impulse but did respect the 50% Fibonacci retracement level of wave 4 vs 3. A wave 4 (green) is the most probable wave pattern as long as price remains above that 50%-61.8% Fib zone, otherwise a different wave pattern is more likely. A bullish breakout above the resistance (red) could confirm the move up within wave 5 (blue-green).

Market movers today

Today's highlight is the US and euro area PMIs. They will be crucial as pointers of the way the global cycle is going over the summer following the US-China trade war escalation. In May, the US PMI manufacturing index for new orders fell to the lowest level since the series was released 10 years ago, sending a clear warning of a recession in the manufacturing sector in the US. We expect a slight further weakening of EA PMI manufacturing, whereas we expect the service sector to still hold up decently.

Today, US existing home sales are released, which should be doing okay on the back of the recent sharp drop in mortgage rates and still very high consumer confidence. Tonight, the Fed's Mester (voter, hawk) and Brainard (voter, dovish) speak.

Selected market news

Global equity markets had a good day yesterday, with indices rising across the globe. In the US, the Dow Jones index rose 0.9%, the S&P recorded all-time highs and the European Eurostoxx 50 rose 0.4%. The global central banks changing their tune and the upcoming meeting at the G20 between Trump and Xi are all supporting risk sentiment. At the same time, global bond yields continue to fall. The 10Y treasury yield flirted with the 2% psychological threshold as Bund yields fell to -32bp.

As widely expected, Norges Bank (NB) raised policy rates by 25bp, taking the sight deposit rate from 1.00% to 1.25%. The rate path was adjusted marginally upwards at the short end and marginally downwards at the long end. The message is clearly hawkish, as a strong domestic business cycle suggests a further frontloading of monetary tightening despite elevated international uncertainty at present. We expect NB to hike the sight deposit rate again by another 25bp at the 19 September meeting.

The Bank of England meeting was rather uneventful yesterday. The BoE mirrored the recent central bank communication about the increased downside risks, although it noted that the 'perceived likelihood of no-deal Brexit has risen'. The FX was weaker on an emphasis on downside risks even if the moderate tightening bias was maintained.

The selection of the new UK prime minister after PM May announced she was stepping down has entered the final stage. The c.160,000 members of the Conservative Party will have to vote between the favourite Boris Johnson and Foreign Secretary Jeremy Hunt for who will head the UK as the new PM and lead the UK through the final stage of the Brexit process.

Brent continued higher yesterday, rising more than USD2/barrel. US-Iran tensions are rising after two tankers were hit last week and a drone was shot down in the strategically important Strait of Hormuz to transport oil, amongst other things. Trump tried to downplay the drone incident yesterday.

Talk over the EU top posts ended overnight with an agreement to discuss the matter again next week. As expected, there does not seem to be a consensus for any candidate. This is a set-back to the EPP and Manfred Weber as he has often been mentioned as the frontrunner.

Yesterday, the media reported that the telephone conversation between the US's Trump and China's Xi was at the request of Trump, which indicates that he is interested in getting trade talks going again. It raises the odds that the meeting will result in another ceasefire and renewed talks. But China has been very clear that it has 'red lines' in the trade talks that Trump will have to accept these to get a deal. Talks could also be complicated by the US attack on Huawei and potential upcoming sanctions related to Xinjiang internment camps that the US is preparing.

Nike (ticker: NKE) shows a higher high sequence from June 3 low ($76.91) favoring more upside. Rally from June 3 low to June 11 high (84.33) unfolded as an impulse Elliott Wave structure and ended wave 1. Pullback to 81.99 ended wave 2. Internal of wave 2 unfolded as a Flat Elliott Wave structure. Wave ((a)) of 2 ended at 82.52, wave ((b)) of 2 ended at 83.92, and wave ((c)) of 2 ended at 81.99.

Nike has since broken above wave 1 at 84.33, suggesting the next leg higher has started. Wave 3 is currently in progress as an impulse structure. Up from 81.99, wave (i) ended at 84.64, and pullback to 83.14 ended wave (ii). Wave (iii) ended at 85.67 and wave (iv) ended at 84.42. Expect Nike to do another leg higher to end wave (v) which should also end wave ((i)) of 3. The stock should then pullback in wave ((ii)) of 3 to correct cycle from June 18 low before the rally resumes. We don’t like selling the stock and expect buyers to appear as pullback stays above 81.99 in 3, 7, or 11 swing.

Nike (NKE) 1 Hour Elliott Wave Chart

For the 24 hours to 23:00 GMT, the EUR rose 0.49% against the USD and closed at 1.1292.

On the data front, the Euro-zone's preliminary consumer confidence index unexpectedly declined to a level of -7.2 in June, compared to market expectations for an unchanged reading. In the prior month, the index had registered a level of -6.5.

The European Central Bank, in its economic bulletin, highlighted a cautious outlook and indicated that underlying growth momentum within the Eurozone has continued to soften since the start of the year. Further, the ECB maintained its dovish stance and loosening monetary policy before the end of the year. Additionally, the central bank projected global growth to decelerate this year.

In the US, data showed that the Philadelphia Fed manufacturing index fell to a 4-month low level of 0.3 in June, compared to a level of 16.6 in the previous month. Market participants had anticipated the index to fall to a level of 10.4. Meanwhile, the nation's seasonally adjusted initial jobless claims dropped to a level of 216.0K in the week ended 15 June 2019, more than market expectations for a drop to a level of 220.0K. Initial jobless claims had recorded a reading of 222.0K in the previous week. Separately, the US leading indicator remained flat on a monthly basis in May, defying market consensus for a rise of 0.1%. In the previous month, leading indicator had recorded a revised rise of 0.1%.

In the Asian session, at GMT0300, the pair is trading at 1.1303, with the EUR trading 0.10% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1268, and a fall through could take it to the next support level of 1.1232. The pair is expected to find its first resistance at 1.1328, and a rise through could take it to the next resistance level of 1.1352.

Looking ahead, traders would closely monitor the Markit manufacturing and services PMIs for June, slated to release across the euro bloc. Later in the day, the US Markit manufacturing and services PMI for June followed by existing home sales for May, will be on investors' radar.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the GBP rose 0.42% against the USD and closed at 1.2705.

The Bank of England (BoE), in its latest policy meeting, kept its key interest rate unchanged at 0.75%, as widely expected and slashed its growth forecast to 0% for the second half 2019, amid uncertainties surrounding Brexit.

In economic news, UK’s retail sales slid 0.5% on a yearly basis in May, compared to a revised fall of 0.1% in the previous month. Market participants had anticipated the retail sales to register a decline of 0.5%.

In the Asian session, at GMT0300, the pair is trading at 1.2716, with the GBP trading 0.09% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.2683, and a fall through could take it to the next support level of 1.2650. The pair is expected to find its first resistance at 1.2738, and a rise through could take it to the next resistance level of 1.2760.

Trading trend in the Sterling today, is expected to be determined by UK’s public sector net borrowing for May, scheduled to release in a few hours.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.71% against the JPY and closed at 107.30.

Data indicated that Japan's final machine tool orders plunged 27.3% on an annual basis in May, confirming the preliminary print and declining for the 8th consecutive month. In the preceding month, machine tool orders had recorded a drop of 33.4%.

In the Asian session, at GMT0300, the pair is trading at 107.06, with the USD trading 0.22% lower against the JPY from yesterday's close.

Overnight data showed that Japan's national consumer price index (CPI) rose 0.7% on an annual basis in May, in line with market expectations. In the prior month, the CPI had registered a gain of 0.9%. Meanwhile, the nation's flash manufacturing PMI contracted to a level of 49.5 in June, marking its biggest fall in 2 years and compared to a reading of 49.8 in the prior month.

The pair is expected to find support at 106.79, and a fall through could take it to the next support level of 106.51. The pair is expected to find its first resistance at 107.61, and a rise through could take it to the next resistance level of 108.15.

Going forward, traders would await the Bank of Japan's monetary policy minutes along with Japan's retail trade, large retailers' sales, jobless rate and industrial production, all set to release next week.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 1.19% against the CHF and closed at 0.9812.

On the macro front, Switzerland’s seasonally adjusted trade surplus narrowed to CHF1.65 billion in May, following a revised surplus of CHF1.91 billion in the previous month.

In the Asian session, at GMT0300, the pair is trading at 0.9815, with the USD trading a tad higher against the CHF from yesterday’s close.

The pair is expected to find support at 0.9767, and a fall through could take it to the next support level of 0.9718. The pair is expected to find its first resistance at 0.9889, and a rise through could take it to the next resistance level of 0.9962.

Looking ahead, traders would keep an eye on Switzerland’s M3 money supply for May, set to release in a while.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.63% against the CAD and closed at 1.3192.

In the Asian session, at GMT0300, the pair is trading at 1.3169, with the USD trading 0.17% lower against the CAD from yesterday’s close.

The pair is expected to find support at 1.3128, and a fall through could take it to the next support level of 1.3086. The pair is expected to find its first resistance at 1.3234, and a rise through could take it to the next resistance level of 1.3298.

Looking ahead, traders would await Canada’s retail sales for April, slated to release later in the day.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.