European Summary and Highlights 14 June
The JPY recovered in the European morning after the overnight sell off, with USD/JPY dropping a big figure to just above 157, while EUR/JPY fell more than 150 pips to trade below 168.
European morning session
The JPY recovered in the European morning after the overnight sell off, with USD/JPY dropping a big figure to just above 157, while EUR/JPY fell more than 150 pips to trade below 168. EUR/USD was also weak, falling half a figure to a low below 1.0680, with concerns around the French election continuing to weigh. EUR/CHF was similarly under pressure, also falling more than half a figure to a low below 0.9530, and EUR/GBP also fell although GBP/USD fell more, losing half a figure to 1.27.
Yields were generally lower, particularly in Europe, with German 10 year yields dropping 13bps. French yields fell less, and the France/Germany 10 year spread widened to 76bps – its highest since 2017. Equities also fell back, with European equities leading the way.
The only data of note was the Swedish CPI data for April which came in above expectation at 3.7% core and 2.3% headline. Initially this triggered some SEK strength but it was quickly reversed, and EUR/SEK finished slightly higher on the morning making the SEK the weakest currency over the morning.
BoJ governor Ueda’s press conference may have helped moderate the market’s reaction to the BoJ’s decision to leave policy unchanged, as he indicated that action was possible in July if inflation moved further towards target while indicating that the JPY’s weakness was putting some upward pressure on inflation.
Asia session
The BoJ once again surprised market participants with no change to bond purchase program nor rates. They did guide that the planning for bond purchase cut will be decided in July. It came as a surprise to market as Ueda hinted such, so as multiple 'source" news report, not to mention wage and inflation both picked up to above 2%. The uncertainty in economic outlook and price setting behavior seems to be the key reason led BoJ to this decision. USD/JPY is trading 0.61% higher at 157.94 with U.S. Treasury Yields up across the curve and JGB yields sunk.
Regional sentiment is mixed with Chinese and Hong Kong equities in the red while Nikkei cheers on BoJ's inaction. U.S. three major equity indexes are all in the green. The Aussie is dragged by mixed sentiment and USD strength and see AUD/USD down 0.15% to 0.6626, NZD/USD also 0.25% lower at 0.6153 while USD/CAD slipped 0.02% with oil up thirty cents. Else, EUR/USD is down 0.02% and GBP/USD down 0.09%.