Asia Summary and Highlights 16 Jun
Geopolitical tension persists
Asia Session
Missiles continue to be firing between Israel and Iran over the weekend. It is also reported that there is a huge number of US Air Force aerial refueling tankers heading toward Europe. Despite U.S. openly stated they are not currently involved, it seems inevitable that the U.S. will enter if its interest is harmed or allies ask for help after suffering significant losses. USD/JPY initially opened ten pips lower and reversed partial losses to trade 0.02% higher to 144.06 with JGB yields outperform U.S. Treasury yields.
Major equity indexes originally opened lower as the crossfire between Israel and Iran. However, as session progress, the market seems to be calmer for there is so far little escalation. Yet, the continual exchange of rockets will be a hanging guillotine for risk asset as there is no guarantee of non-escalation. AUD/USD is trading 0.12% higher at 0.6495, NZD/USD is also trading 0.19% higher at 0.6028 while USD/CAD rose 0.02%. Else, EUR/USD is up 0.04% and GBP/USD down 0.04%. Major currency opened lower against the USD and have since closed the gap at least once.
North American session
The USD corrected European gains in North America, though the correction lost momentum late in the session as Iran launched a retaliatory attack on Israel. USD/JPY was relatively resilient holding on to most of its earlier gains, but did slip back below 144. EUR/USD recovered to 1.1550 from 1.15 and GBP/USD reached as high as 1.36 from 1.3520 before correcting to 1.3560. EUR/GBP and EUR/CHF saw limited North American movement. With oil sustaining a sharp bounce USD/CAD fell below 1.36 though AUD/USD could not hold a move back above .65.
The only US data release was a stronger than expected preliminary June Michigan CSI of 60.5 from 52.2 in May as tariff fears were reduced. The 1-year inflation expectation fell sharply to 5.1% from 6.6% though the 5-10 year view at 4.1% was down only marginally from 4.2%. UST yields picked up but equities were weaker, an attempt to recover from early weakness fading after the Iranian retaliation.