European Summary and Highlights 18 June

European morning session

USD/JPY gained around 50 pips through the European morning, while most other pairs were not much changed. The USD was marginally firmer against GBP, while EUR/USD and AUDUSD were little changed. EUR/CHF fell around 30 pips to 0.9510, despite there being little news and a slight narrowing the France/Germany 10 year yield spread., so that CHF/JPY made another all time high at 178.18.

There was little news of note. The German June ZEW survey came in weaker than expected in both the sentiment and the current conditions indices, but the Eurozone ZEW survey (not much watched) was stronger. Eurozone final CPI was unrevised at 2.6% y/y.

Asia session

The RBA meeting has kept rates on hold with recognition of slower CPI moderation than expected. The interest rate decision aligns with our forecast as the RBA could not justify neither tightening nor easing when the quarterly CPI is at 3.6% while monthly CPI stays at 3.6% q/q, above the RBA's target range and show minimal progress of moderation in the past months. With no change to their forecast of returning to target range in mid 2025, it seems to point towards the current rate will be held longer. AUD/USD is trading unchanged after a twenty pips swing, NZD/USD is down 0.24% at 0.6116 while USD/CAD rose 0.11% as oil down forty cents. 

In Ueda's speech before the Diet, he said the BoJ could raise interest rates at July meeting, depending on economic, price and financial data and information available at the time. While such remarks from a central bank governor usually spark an immediate and drastic reaction in the market, USD/JPY barely moved as Ueda's credibility has been tarnished by repetitively not following through. The overall direction within BoJ did not change with expectation of strengthening in Japan wage-price cycle and thus inflation. USD/JPY is trading 0.06% lower at 157.61 with JGB yields outpace the U.S counterpart. Else, EUR/USD is down 0.12% and GBP/USD is down 0.07%.