Sample Category Title

USD/CHF - 0.9743

Most recent candlesticks pattern : N/A

Trend                                    : Near term up

Tenkan-Sen level                  : 0.9741

Kijun-Sen level                    : 0.9749

Ichimoku cloud top                 : 0.9717

Ichimoku cloud bottom              : 0.9701

Original strategy :

Buy at 0.9705, Target: 0.9805, Stop: 0.9670

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9705, Target: 0.9805, Stop: 0.9670

Position : -

Target :  -

Stop : -

As the greenback has eased after surging to 0.9771 yesterday, suggesting minor consolidation below this level would be seen and pullback to 0.9720 cannot be ruled out, however, reckon support at 0.9703 would limit downside and bring another rise later, above said resistance at 0.9771 would extend recent rise from 0.9613 low to resistance at 0.9808, however, reckon previous resistance at 0.9825 would hold from here due to near term overbought condition, bring retreat later.

In view of this, we re looking to buy dollar on pullback as 0.9700-05 should limit downside. Below 0.9680 would defer and risk weakness towards said support at 0.9641 but only break there would abort and revive bearishness, this would also suggest the rebound from 0.9613 has ended instead, bring retest of this level later.

GBP/USD - 1.2782

Most recent candlesticks pattern   : N/A

Trend                                 : Near term down

Tenkan-Sen level                 : 1.2783

Kijun-Sen level                    : 1.2772

Ichimoku cloud top              : 1.2754

Ichimoku cloud bottom        : 1.2749

Original strategy :

Sold at 1.2790, stopped at 1.2800

Position : -  Short at 1.2790

Target :  -

Stop : - 1.2800

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Although the British pound edged higher in NY morning and gain towards indicated resistance at 1.2818 cannot be ruled out, break there is needed to signal the erratic rise from 1.2635 low is still in progress and may extend gain to 1.2845-50 (61.8% Fibonacci retracement of 1.2978-1.2635) but upside should be limited to 1.2870-80 and price should falter below 1.2900, bring another decline later. 

In view of this, would not chase this rise here and would be prudent to sell cable on further subsequent recovery, Below 1.2720-25 would suggest an intra-day top is formed, bring test of indicated support at 1.2690 but break there is needed to revive bearishness and signal the rebound from 1.2635 has ended, bring further fall to 1.2650, then towards said support at 1.2635.

EUR/USD - 1.1191

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 1.1176

Kijun-Sen level                  : 1.1166

Ichimoku cloud top             : 1.1220

Ichimoku cloud bottom      : 1.1201

Original strategy  :

Sell at 1.1210, Target: 1.1110, Stop: 1.1245

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.1220, Target: 1.1120, Stop: 1.1255

Position : -

Target :  -

Stop : -

As the single currency has rebounded after holding above yesterday’s low at 1.1132, suggesting consolidation above this level would be seen and corrective bounce to 1.1210-15 (50% Fibonacci retracement of 1.1296-1.1132) cannot be ruled out, however, reckon 1.1230-35 (61.8% Fibonacci retracement) would limit upside and bring another decline later. Below 1.1155-60 would bring retest of 1.1132, break there would extend recent decline from 1.1296 top to previous support at 1.1109. 

In view of this, we are looking to sell euro on recovery as 1.1210-15 (50% Fibonacci retracement of 1.1296-1.1132) should limit upside and bring another decline. Above 1.1230-35 (61.8% Fibonacci retracement) would defer and risk a stronger rebound to 1.1250 but price should falter well below said resistance at 1.1296, bring another decline later.

Brexit negotiations finally begin in Brussels on Monday. New Zealand's central bank will be in focus next week while flash June PMI surveys out of the Japan, the Eurozone and the United States will also be on investor's watch list. Various FOMC members are due to give speeches. French President Emmanuel Macron's Republic on the Move (REM) party is set to win Sunday's legislative elections.

Brexit Negotiations

Brexit negotiations are due to start on Monday June 19 with Brexit Secretary David Davis meeting the EU's negotiator Michel Barnier in Brussels on Monday. In the aftermath of the UK elections which resulted in Prime Minister Theresa May losing her majority government, it would be interesting to see if her hard Brexit stance will prevail or will the UK aim for a soft Brexit.

French legislative elections

The final round of the legislative elections in France are being held this Sunday. The latest polls indicate the President Emmanuel Macron's Republic on the Move (REM) party is heading for a landslide victory.

Reserve Bank of New Zealand

The Reserve Bank of New Zealand (RBNZ) is due to announce its monetary policy decision on June 22. The central bank is expected to keep its benchmark rate at a record low and to stick to its neutral stance. The latest softer-than-expected first quarter economic growth would likely push the RBNZ to remain accommodative for longer. The GDP report showed the economy growing at the slowest pace since 2015 at 0.5% on the quarter. In May, the RBNZ kept the official cash rate at 1.75% and hinted it would remain on hold until at least the end of 2018. A shift in the bank's neutral stance next week to a more positive outlook could help the kiwi bounce back after the post-GDP dip.

Japan PMI and BOJ minutes

On Wednesday, the Bank of Japan will release the minutes of its April policy meeting. The central bank kept all its policy settings unchanged at the meeting, as was widely expected. Next week's minutes could offer some more insight. Economic data releases from Japan next week include May trade data on Monday and June manufacturing PMI on Friday.

RBA minutes and Governor Lowe speech

On Tuesday, the minutes of the Reserve Bank of Australia's latest policy meeting will be published. At its meeting, the RBA held the main cash rate at 1.50% as was widely predicted, despite expectations of weaker growth in the Australian economy. Meanwhile, a speech by RBA Governor Phillip Lowe will be scrutinized on Monday for any clues regarding future monetary policy.

United States - Home sales and PMI

Various data on the housing sector for the month of May are due for release next week. Existing home sales are due on Wednesday while new home sales are expected on Friday. The flash Markit manufacturing and services PMI surveys for June are also scheduled for release on Friday.

A number of Fed speakers will attract attention next week for insight into the US central bank's policy path. The FOMC meeting this week resulted in a much-expected date hike of 25 basis points bringing the fed funds rate to between 1.00 and 1.25%. The Fed was more hawkish than expected and appears on track to raise rates one more time this year. New York Fed President William Dudley will kick off a busy week of Fed speeches followed by Chicago Fed President Charles Evans. On Tuesday, Vice Chair Stanley Fischer, Boston Fed President Eric Rosengren, and Dallas Fed President Robert Kaplan are all set to speak. Finally, to end the week, St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester will gives speeches.

Canada - retail sales and inflation

Canada will release April retail sales numbers on Thursday while CPI data for May are due next Friday. Inflation data are particularly closely watched by the Bank of Canada when making decisions on monetary policy. BoC Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins speaking earlier this week, suggested the central bank was starting to make the case for a modest tightening in monetary policy later this year, much sooner than many people had thought.

Eurozone PMI

June PMI data for the Eurozone next week could provide supporting evidence of a stronger economic recovery in the region. The composite PMI from IHS Markit, which comprises the services and manufacturing components, is forecast to ease slightly from May's 56.8 to 56.7 in June. This will be a preliminary reading, so it would be important to watch.

Next week's market movers

• In New Zealand, the RBNZ is expected to take no action. We think that the tone of the meeting statement may be slightly more cautious than previously.
• The Norges Bank is also forecast to stand pat. We see the case for policymakers to communicate a somewhat more upbeat message.
• In the UK, the beginning of the Brexit negotiations and the Queen's Speech are likely to attract market attention.
• We also get key economic releases from Australia, the Eurozone and Canada.

On Monday, we have a relatively quiet day, with no major indicators due to be released. Given the absence of economic events, traders may turn their attention to political developments and specifically to the EU-UK divorce. The first round of Brexit negotiations is expected to start on this day, according to statements by both sides. Having said that, we think that until the UK sorts out its new government, these talks could attract less attention than one would expect, as it is not certain yet which UK officials will be attending these talks in a few weeks, and most importantly, with what mandate. The situation is likely to clear up once Parliament votes on the Queen's Speech (see below).

On Tuesday, the RBA will release the minutes of its June policy gathering, where the Bank kept its policy unchanged, and maintained a balanced tone overall. Even though policymakers offered very little new information regarding the next move in interest rates, they did appear slightly more upbeat on the labor market, a sector of the economy they had previously expressed concerns about. We think that market focus will revolve mainly around their views on this topic again, considering that the last two employment reports from Australia have been stellar. Even though this may not be reflected in these minutes, as the latest jobs report was released after the RBA meeting, we think that the Bank is likely to sound more upbeat with regards to the labor market when it meets again, on the 4th of July.

On Wednesday, market focus will probably turn back to the UK, where the Queen's Speech takes place. The Queen will outline a list of laws that the government wants to get approved over the coming year. Parliament will spend the following six days debating these plans, before holding a vote. Thus, we will probably know the outcome the week after. It will be particularly interesting to see whether lawmakers approve it or not. If Theresa May secures the support of the DUP lawmakers, or if other parties support her policies, she keeps her place as Prime Minister and she is the one to carry out the Brexit negotiations. However, if May is unable to establish a majority that votes for the Speech, then Labour leader Jeremy Corbyn would be invited to attempt to form a government.

On Thursday, during the Asian morning, the RBNZ rate decision will be in the spotlight and the forecast is for the Bank to keep its policy steady. At its latest policy meeting, the Bank kept the door for further easing open, indicating that much of the recent progress in inflation was transitory. Meanwhile, policymakers noted that growth was soft in H2 2016, but the growth outlook remained positive. With regards to the Kiwi, they indicated that its 5% decline since February was encouraging, and if sustained, this would help to rebalance the growth outlook. However, ever since, developments on the latter two fronts have been quite discouraging. GDP data for Q1 showed that growth was only +0.5% qoq, far below the RBNZ's forecast of +0.9% qoq. Meanwhile, the NZD recovered notably, and is now trading at levels similar to those in February, when officials had noted that "a decline in the exchange rate is needed". Bearing all these in mind, we think that the Bank is likely leave the prospect for further easing on the table, and may also reintroduce its prior concerns regarding the exchange rate.

During the European day, the Norges Bank will announce its rate decision too. At its latest gathering, the Bank was quite cryptic, offering almost no new information on policy. It basically noted that the outlook for the economy had not changed much since its March assessment. Back in March, the Bank indicated there is a slightly higher probability of a rate cut rather than a rate hike in the coming period. Recent developments have been mixed, on balance. On the bright side, GDP growth for mainland Norway came +0.6% qoq in Q1, above the NB's March forecast of +0.4% qoq, and the unemployment rate declined to 2.6% in May, better than the Bank's expectations of 2.9%. On the downside, the core CPI rate declined to +1.6% yoy in May, notably below policymakers' forecast of +1.9% yoy. However, having said that, the recent decline in NOK argues in favor of a higher inflation rate in coming months, so the NB could incorporate into its forecasts a higher inflation path moving forward. In this case, we would not exclude the scenario of a more optimistic tone by policymakers, considering that the slowdown in inflation is the only dark spot in Norway's economic picture at the moment.

On Friday, we get preliminary manufacturing and services PMIs for June from several European nations and the Eurozone as a whole. The manufacturing indices are expected to have declined slightly, while the services figures are forecast to have ticked up. In any case, all of these indices are anticipated to remain at elevated levels, consistent with solid economic growth in the Eurozone. Such prints would also be in line with the ECB's assessment that the risks to Euro area's growth outlook are now "broadly balanced", and could enhance our own view that the Bank will probably continue to shift towards a more sanguine tone at its upcoming meetings.

In Canada, CPI data for May will be in focus, though no forecast is available yet. Given that the yearly change in oil prices has turned negative, we believe that the headline rate is likely to slide, even if the core print stays unchanged. In order to see the headline rate turning up, we need a strong rebound in the core rate, which appears unlikely in our view. On Monday, BoC Deputy Governor Carolyn Wilkins indicated that the Bank will assess whether all the monetary stimulus currently in place is still needed, which raised speculation that the Bank may start considering raising interest rates in the not-too-distant future. Therefore, further slowdown in inflation may pour cold water on expectations with regards to a more hawkish BoC at the upcoming meetings.

USD/JPY - 111.05

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 111.04

Kijun-Sen level                  : 110.92

Ichimoku cloud top             : 109.81

Ichimoku cloud bottom      : 109.65

Original strategy  :

Buy at 110.40, Target: 111.40, Stop: 110.05

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 110.35, Target: 111.35, Stop: 110.00

Position :  -

Target :  -

Stop : -

As the greenback has retreated after meeting resistance at 111.42, suggesting consolidation below this level would be seen and pullback to 110.30-35 (50% Fibonacci retracement of 109.27-111.42) cannot be ruled out, however, renewed buying interest should emerge there and bring rebound later, above 111.05-10 would bring retest of 111.42 but break there is needed to confirm the rise from 108.82 low has resumed for retracement of recent decline from 114.37 to 111.60 (50% Fibonacci retracement of 114.37-108.82) and then test of previous resistance at 111.71 but price should falter well below another resistance at 112.13. 

In view of this, we are looking to buy dollar on pullback but one should exit on next rise. Below 110.05-10 (61.8% Fibonacci retracement of 109.27-111.42) would abort and signal top has been formed, bring further fall to 109.85-90 and possibly towards 109.50 but support at 109.27 should remain intact. 

• Markets Return To A Focus On Central Banks - Peter Rosenstreich
• Fed Remains On Track Despite Faltering Inflationary Pressures - Arnaud Masset
• Economic Uncertainties Still Prevail In Japan - Yann Quelenn
• Global Electric
• RBNZ Could Surprise - Peter Rosenstreich

Economics - Markets Return To A Focus On Central Banks

Trading President Trump or European political uncertainty has done our heads in. Yet these rogue events have been the only true drivers of volatility while it has become difficult to say the least to provide plenty of price action directional and forecastable predictions. Last week the focus returned to Central Banks and monetary policy and we breathed a sigh of relief. We can handle these fundamentals more than random 3am tweets from Trump. For traders, monitoring Central Bank policy strategy will once again become profitable. On the whole, slightly more hawkish decisions by the Central Banks sent bond yields higher.

Setting the pace last week was the FOMC, which clearly indicated to investors to ignore short-term noise. The Fed delivered a 25bp hike to 1.0-1.25% and held the DOTS basically unchanged. Fed members discounted the recent inflation weakness (punctuated by a soft CPI read only hours prior), highlighting transitory effects and placing significantly more emphasis on the strong labour markets.

The failure to acknowledge soft inflation forced the markets to meaningfully price-in a December hike. But potentially more influential on rate and USD were the additional details on balance sheet reduction, which had the markets pulling forward the announcing to September (already our prediction). Moving forward, we expect the Fed will drive USD against low yielding G10 currency but remain weak against EM currencies.

The Bank of Canada surprised the markets with a hawkish shift due to positive economic momentum. The absorption of lower oil prices has already occurred and bubble-like behaviour in real-estate markets has increased the probability of the BoC starting its tightening cycle sooner than anticipated. We have a hike penciled in for early 2018, which combined with overly bearish CAD position and fading protectionist threat will give CAD further bullish momentum. The Bank of England looked above the political fray and Brexit chatter to strike a hawkish tone. Unexpectedly, three members on the MPC voted for a rate hike. Dissenters focused on strong labour market conditions and the threat of an inflation overreach.

We suspect despite mixed signals, this hawkish tone is correct given the BoE's long-standing challenge with battling inflation and our view of a "soft" Brexit. We still don't see a Brexit-induced correction in the UK consumer, although very weak retail sales has us vigilant, dragging down growth at this point.

With a rate hike on the table and political developments (on both sides of the channel) indicating a less punishing agreement and expectations for a stronger GBP, one of our strongest conviction ideas is long GBPCHF based on monetary policy deviations.

Economics - Fed Remains On Track Despite Inflationary Pressures

As broadly expected, the Federal Reserve lifted borrowing costs by 25bps following a two-day meeting. The decision was already priced-in by market participants. However, the Committee created a stir with a surprisingly hawkish statement and press conference from Janet Yellen despite the recent publication of lacklustre economic data. Indeed, the last CPI and retail sales reports came on the soft side and triggered a USD sell-off, just a couple of hours before the announcement of FOMC's decision. The consumer price index extended only 1.9% y/y in May versus 2.0% expected and down from 2.2% in the previous month amid sustainable downside pressure on crude oil prices. In addition, the core measure, which excludes the most volatile components such as food and energy prices, slid to 1.7% y/y, down from a previous reading and median forecast of 1.9%. Finally, retail sales printed in negative territory and contracted 0.3% m/m in May, well below market expectations of a flat reading, signalling that US consumers preferred to remain cautious against the backdrop of political jitters in the US and an uncertain economic outlook.

Committee members seemed committed to hold the line and keep steady the tightening pace as announced at the preceding meetings. Moreover, the Fed remains highly confident the recent set-back in inflation developments is only temporary and expects to increase by another notch the federal funds target before the end of the year. In our opinion, the fact that the Fed is not really concerned about the disappointing inflation readings suggests that the institution may have started to reconsider the ground for reaching at all cost the 2% inflation target. Indeed, overall the US economy is not in such a bad state as it is not in recession anymore and the economic growth is the envy of many countries. Finally, the Committee discussed further about balance sheet unwinding as it drafted carefully a plan for policy normalisation; and it is expected to be implemented before the end of the year.

However, the Fed remained extremely cautious by stating that "the Committee would be prepared to resume reinvestment of principal payments received on securities held by the Federal Reserve if a material deterioration in the economic outlook were to warrant a sizable reduction in the Committee's target for the federal funds rate".

The USD was broadly higher this morning and erased partially the losses triggered by the release of the CPI and retail sales report. Housing starts and building permits also came in largely below expectations. EUR/USD is back below 1.12 and currently into a positive short-term momentum.

Economics - Economic Uncertainties Still Prevail In Japan

A set of data has been released earlier last week and it seems it is a neverending story for Japan.

April machine orders just collapsed at -.31% m/m while markets had estimated an increase of 0.5. This data is often used as a proxy for the capital expenditure.

Other recent fundamental data showed improvement in Japan's economy. Japan's demand has accelerated according to a report released last Wednesday and central bankers, once more, expect this demand to keep growing, in particular the foreign demand. Nonetheless the inflation is standing well below the target, and this has not changed for the past decade. CPI is currently standing at an annualised data of -0.4%.

Investors seem to be reluctant to invest domestically, due to several possible reasons including uncertainties about President Trump's trade policy and about Japan's economic future.

Later last week, the Japan producer price index came in flat at 0% and it represents the weakest PPI result in nine months. Already last week, the growth rate had been revised down to 0.3% from 0.5%.

The yen has slightly strengthened against the US dollar because of a riskoff sentiment in the market over the past few weeks.

Upside pressures on the currency remain but the BoJ cannot tighten its monetary policy or it would largely hurt its economy. The safe haven status is also one key issue, as whatever the state of Japan's economy, investors would drive their money as soon as a risk-off sentiment arises.

But we consider the economy in Japan is still struggling to recover. The sad reality is Japan has not succeeded in boosting private consumption, which accounts for 60% of the GDP.

This is why BoJ had no choice than to hold its monetary policy unchanged for now. The base rate has been kept on hold at -0.1% last Thursday and the central bank will continue to focus on maintaining the 10-year yield to 0 by purchasing massive amounts of Government bonds (80 trillion yen annually).

The BoJ seems definitely stuck in its very loose monetary policy as deflationary pressures are still important.

We believe that Japan, in the medium-term, will try to expand the monetary policy divergence with the US in order to help reduce pressures on its currency. Yet, we consider that the US economy is overestimated and may trigger again inflow towards the Japanese yen. We reload bullish yen positions around 112 against the greenback.

Themes Trading - Global Electric

The growth in electric energy consumption continues to be a reliable investment theme. According to the IEA 2014 report total final world consumption from 2000 to 2014, increased by 60% and is forecast to grow at an equally fast pace. While the sources of energy have become diverse and abundant, the electricity sector remains a stable revenue generator. The explosion of electrical devices growing alongside the expansion of the global middle class has demand for electricity and utility services are driving the sectors returns.

Utilities generally sell electricity through regulated markets by operating generation, conduction and distribution services. These legal monopolies are good for income seekers as they produce dividend yield, which are stable and higher-than-average. This theme sources the global top 15 corporations according to market capitalization as the massive barriers to entry will discourage new entrants and reward large players.

FX - RBNZ Could Surprise

The RBNZ's 22nd June rate decisions might be more interesting than generally expected. Markets suspect that the bank will be concerned over the slowing growth due to disappointing 1Q GDP. However, there is scope for a slightly more hawkish communication. Last week's data flow sent Antipodean traders into a spin with good Australia and weak New Zealand data. However, we suspect temporary dislocation will normalise with New Zealand economic momentum picking up.

New Zealand's 2.5% from 2.7% annual GDP growth read might have been slower than expected, however growth pace remains solid within the G10 ranking. The underlying GDP private spending components indicate strong trend, supported by surveys outlook (PMI manufacturing rose to 58.5). On the inflation side, the forecast puts the read on the higher side as 2Q CPI stands at 2.2%. Commodity prices will clearly drag across the board, yet dairy prices remain buoyant.

Overall, we should not overlook that New Zealand economic data has generally surpassed market expectations. The RBNZ sees interest rates on hold until H2 2019, but markets are pricing-in 13bp of rate hikes by May 2018. This monetary policy decision is not a forecasting meeting with only an accompanying statement. The primary message will remain unchanged that monetary policy will continue "accommodative for a considerable period," indicating that NZD depreciation will support rebalancing and inflation pressure is likely to increase slowly.

While traders are now focused on AUDNZD reversal based on stretched growth differentials, forecasts would watch NZDJPY. Last week the BoJ held its assessment on inflation and the economy providing only the slightest optimist tone on household consumption. But for those traders who were expecting that political pressure and marginally positive economic data would force the BoJ to discuss exit strategies, they were mistaken.

At the accompanying press conference Governor Kuroda clearly stated that communicating exit strategy was not appropriate since the bank's targets were not reached. In addition, he indicated that talk of US and EU exit strategies were not suitable for Japan's economic condition. Should we get even a most minor of RBNZ tone shift (a BoC type of redirection) monetary policy divergence will continue to benefit long NZDJPY trades.

NZDUSD is making an intra-day rally from the lows, where previous five wave movement has ended. That said, current rally can now be part of a three wave contra-trend reaction that can in sessions ahead find some resistance around the Fibonacci ratio of 50.0/61.8 and near the previous swing high of wave four at 0.7269. Around the mentioned area a new reversal lower can begin.

NZDUSD,1H

• EMU equities went moderate higher( 0.4% EuroStoxx) led by utilities and IT. US equity indices start with minor (S&P/Dow) to moderate losses (Nasdaq).
• The pace of US new-home construction unexpectedly cooled in May, the latest piece of data to offer a mixed reading on the economy's QE performance. Housing starts tumbled 5.5% M/M to an annualised pace of 1.09m units, widely missing expectations of a 4.1%. Permits were down 4.9% to an annual pace of 1.2m units, also missing forecasts.
• Prime Minister Theresa May's government has bowed to European Union demands to focus the initial stage of Brexit talks on the terms of the U.K.'s departure rather than trying to arrange a future trade relationship at the same time, according to two EU officials with knowledge of the preparations.
• The Russian rouble outperformed its emerging-market peers on Friday after oil prices picked up and the country's central bank cut interest rates to 9% from 9.25%, less than some analysts had expected, as investors remain relatively sanguine about the currency's prospects despite weaker oil prices and new sanctions from the US.
• Nine months after schedule, Greece finally has some more creditor cash. The country's stock index been driven to a two-year high and bonds are rallying after eurozone and International Monetary Fund officials agreed to unlock a $8.5B bailout tranche to help Greece avoid default and pay off some of its arrears.
• Labour costs in Spain remained steady in the first quarter of 2017 after falling throughout last year, reflecting the growing strength of the country's labour market, but highlighting the fact that there is still a long way to go before the ECB sees its goal of higher wage growth across the eurozone.
• Wages for French workers grew at their fastest pace in three years at the start of 2017 - showing welcome signs of acceleration as the country prepared for its major presidential election. Quarterly wage growth picked up to 0.6% in Q1 from 0.1% in Q4 of 2016.

Rates

Core bonds end the week uneventful

Following wild swings in the past two sessions, core bonds are little changed today in a low volume session devoid of key data releases or events. The Bund started the session on a weak footing and lost more ground in follow through selling, but the tide turned at mid-morning and losses were erased during the remainder of a lethargic session. US Treasuries moved sideways in a tight range, but weak housing data brought a bid in the market, pushing US Treasuries to minor daily gains. It helped the Bund travel to unchanged levels.

The German yield curve shifted marginally higher with yields changes varying between -0.5 bp (5-yr) and +2 bp (30-yr). The US curve bull steepened with yields down by 2.2 bps (2-yr) to 0.2 bp. Intra-EMU spreads versus Germany (10-yr) were nearly unchanged with exception of the Greek spread which narrowed about 20 bps on an agreement to pay out the second tranche of the bailout package, allowing Greece to redeem maturing bonds in July.

Currencies

Post-USD rebound already running into resistance?

In technical trading, EUR/USD reversed part of yesterday's post-Fed decline. The move was supported by poor US housing data. USD/JPY initially profited from a constructive equity sentiment, but the momentum also eased during the US session. EUR/USD trades in the 1.1175 area. USD/JPY tries to stay north of 111. So, the dollar trades off the recent lows, but it's too early to call a sustained USD comeback.

Asian stock markets traded mixed. Japan outperformed, profiting from the post-Fed USD/JPY rebound. This rebound continued this morning. The BOJ left its policy unchanged as expected. The BOJ slightly raised its assessment on the Japanese economy, but BOJ governor Kuroda indicated that it is too early to discuss any concrete steps on the exit policy as this exit is still far away. The dollar also maintained gains against the euro. EUR/USD hovered near 1.1150.

There was little news to guide EUR/USD trading during the European morning session. Yield changes were modest. If anything, spreads between the US and Germany narrowed marginally. Yesterday's post-Fed USD rebound slowed and EUR/USD reversed part of yesterday's decline in technical trading. USD/JPY remained better bid. The BOJ policy decision being out of the way maybe gave some comfort to JPY bears. The pair was also supported by a constructive equity sentiment. The pair filled offers in the 111.40 area.

The US housing data disappointed again in May (see headlines) Housing data are usually no market mover, but time US yields, the dollar and even US equity futures declined a bit. Markets still feel unease with disappointing US data. USD/JPY drifted back to the low 111 area. EUR/USD returned close to the intraday highs, currently trading in the 1.1175 area. The Michigan consumer confidence release might still amend the end of week FX positioning.

No follow-through gains on the BOE sterling rally

Sterling entered calmer waters. Yesterday, the UK currency received BOE support. However, there were no follow-through sterling gains. The eco calendar was empty and there was also no high profile news from the political scene. Cable was locked in a tight sideways range in the upper half of the 1.27 big figure. EUR/GBP rebounded slightly off the overnight correction low (0.8720 area), but this move mostly mirrored a modest rebound of the euro after yesterday's EUR/USD decline. EUR/GBP hovers in the 0.8750 area. Sterling maintains most of yesterday's gains but political uncertainty remains high as UK PM May is still trying to strike a deal with the DUP to support her minority government. At the same time, the Brexit negotiations are scheduled to start next week. Press headlines suggest that the UK would be prepared to discuss the terms of the divorce first, which would be a concession to the EU at the start of the negotiations. Is this a precursor for a less hard Brexit?

Market movers ahead

• In the US, we will look out for any comments in speeches by FOMC members about what drove the decision on the June rate hike, which in our view was not justified by the data. On the data front, we get PMI figures and we continue to believe that the moderate growth will primarily be driven by the service sector.
• Consumer confidence stood at the highest level since 2007 in May. We expect it to keep increasing in June on the back of rising employment and fading political uncertainty.
• In China, we expect the recent increases in rates and yields are likely to feed into a slowdown in housing for the rest of the year and a moderation in house-price inflation.
• On Thursday, we expect Norges Bank to keep rates unchanged and remove its 'easing bias' from the interest rate path.

Global macro and market themes

• The Fed strikes a hawkish tone, hiking rates and setting out its balance sheet reduction...
• ..rating the tightening labour markets as more important than recent weak inflation prints.
• Further flattening of the US yield curve likely.
• We maintain our equity call of 'sell-on-rallies' near-term...
• ..as well as our tactical bearish EUR/USD trade recommendation.
• We see rising risk from China to the global outlook.

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