Europe Summary and Highlights 2 Sep
Bond pressure still in focus, risk somewhat weighed
Yen finding some support and renewed short switching to CHF
NZD continues to sell back from range tops after RBNZ, sell fact snowballs over session
Europe
Bonds pressure and some (albeit currently modest) spillover to risk still a big focal point. US10s continue to inch out, clearing 4.8%, with the same elsewhere, JP10s holding a break above 3%. Bunds also off half a point today for example and the Dax -0.8%.
Interesting price action on the yen stands out, USD/JPY selling back from the 160.40 test back to the 159.40 hourly support but in fairly controlled intraday selling fashion (started by export sales?). Comments from Ueda and board member Takata support view hike on Sep meeting agenda, odds currently at 75%.
As well as some possible risk aversion support and maybe even local bond support, there’s also signs of some renewed carry leg switching to CHF after a breather, with CHF/JPY off 2 figures in a few days. EUR/CHF out to new 1yr highs also. CHF is the last of the low yielders (and ZIRPs in fact) and that transition is speeding up.
NZD continues to see heavy sell-the-fact out of the RBNZ hike given the somewhat less hawkish tone and on ongoing positional selling (NZD/USD has been on a slide since testing and rejecting the post-Mar 0.60~ tops a week or so ago. Break of 0.59 and then .50 on the way down adding to the squaring with the low just above 0.58. Risk sentiment not helpful either of course (and SEK to a smaller extent on the day).
Asia Session
Axios reported that U.S. had stroke Iranian tankers for first time under new deterrence policy. The target of attacks, including radar, mine laying and anti-ship missile capabilities, continue to points toward U.S. aim of neutralizing Iran's capability to harass the Strait of Hormoz. Oil continue to ride the waves. AUD/USD is trading 0.03% lower at 0.7142 while USD/CAD rises 0.13% as oil erases gains. The RBNZ hike rates by 25bps to 2.75% in the September meeting unanimously. It is widely expected as the overall inflationary pressure is rising and headline figure has long overshoot target range. However, the lack of changes in inflation expectation has disappointed hawks because it indicates no hawkish tilt in the future OCR path. NZD/USD sunk by 0.81% to 0.5843.
BoJ's Takata has began blowing the wind for rate hike. While he is a notable hawk, his argument for more active role from the BoJ is not wrong in the current inflationary dynamic. JPY is catching a bid on hopes of commitment from the BoJ in September. USD/JPY is trading 0.37% lower at 159.58. Else, EUR/USD and GBP/USD are down 0.08%.