European Summary and Highlights 04 June
JPY strength was the main feature of the European morning.
European morning session
JPY strength was the main feature of the European morning. USD/JPY fell more than a big figure to 155.15, and EUR/JPY fell nearly two big figure to 168.60. JPY strength was helped by comments from BoJ deputy governor Himono, who said the central bank must be "very vigilant" to the impact the yen's moves could have on the economy, suggesting the currency's weakness will be among factors affecting the timing of its next interest rate hike. These comments built on an early firm JPY tone, supported by the combination of lower yields in the US and Europe and softer equity markets.
The USD was generally firmer against the riskier currencies, underlining the “risk off” nature of the move. EUR/USD dropped nearly half a figure from 1.0910, and AUD/USD lost nearly 1% to 0.6635. The CHF also outperformed, with EUR/CHF falling to 0.9710 after opening at 0.9760. EUR/CHF initially rallied above .09770 after Swiss CPI came in on consensus at 0.3% m/m, but fell back as the general risk negative tone took hold. The risk off trade also put the scandisk under pressure, with EUR/NOK rising 10 figures to 11.50 and EUR/SEK 5 figures to 11.40.
Asia session
USD/JPY has faded the early rebound at 156.48 to 156.15 currently. U.S. Treasury are outperforming JGB yields. While the gap lower in JGB yields seems to be the reason for a run in the pair earlier in the session, comments from Ueda "If underlying inflation moves as we project, we will adjust degree of monetary support" seems to have provided JPY some bids as speculation of an June hike surfaces, echoing our call. Suzuki says intervention in late April/early May a response to speculation after the BoJ report shown roughly 10 trillion JPY was spent in FX intervention and says will continue to respond appropriately.
Risk sentiment is mixed with HSI squeezing out some gains after dropping close to 1% while Chinese, Japan and U.S. equities all fell. Preliminary data, business inventories, profit, etc. all points towards a softer GDP to be released on Wednesday. They are dragging the AUD/USD down 0.22% to 0.6674, NZD/USD is down 0.06% to 0.6188 while USD/CAD rose 0.16% to 1.3648 as oil continue to slip. Else, EUR/USD is up 0.01% and GBP/USD is down 0.03%.