European Summary and Highlights 20 June

European morning session

The CHF fell back and the NOK gained through the European morning after the SNB cut then policy rate 25bps and Norges Bank left rates unchanged. EUR/CHF gained around 0.5% to 0.9540 while EUR/NOK lost around 0.5% to 11.30. The CHF weakness was helped by comments from the SNB’s Jordan indicating a willingness to intervene in the FX market and forecasts that suggested a strong chance of a further rate cut in September. NOK gains reflected a higher projected rate path n the Norges Bank monetary policy report, although this had to some extent been anticipated after recent more hawkish comments.

Otherwise the USD was generally firmer, with EUR/USD 20 pips lower to 1.0720 and USD/JPY 30 pips higher to a high of 158.48, its highest since the first round of BoJ intervention on April 29, but AUD/USD and USD/CAD were little changed.

Asia session

The New Zealand Q1 GDP has exited recession and return to a growth of 0.2% q/q, beating estimates of 0.1%, 0.3% y/y also beating estimate of 0.2%. The Kiwi jumped on the data but quickly reversed as none are expecting another hike from the RBNZ. Moreover, even as NZ exited recession, the growth is slow and does not show any anticipating strength in the report. NZD/USD is trading 0.03% higher at 0.6133 after touching a session high of 0.6148. The AUD.USD is unchanged while USD/CAD rose 0.07% with oil down ten cents.

The Japan Business Survey is showing only 7% business believe wage can catch up with inflation. Some are suggesting small to medium firms may have a hard time trying to hike wage that is on par of inflation. While it is a survey of sentiment, it would not be favorable as BoJ will likely rationalize the next move in tightening by wage driven demand inflation. USD/JPY is trading 0.06% higher at 158.14 with both the U.S. Treasury and JGB are higher. Else,EUR/USD is up 0.01% and GBP/USD is down 0.05%.