USDJPY dipped 0.43% overnight and dipped under the 110 support once again, given waning risk appetite seen in riskier assets and continued cautiousness following the UK’s election and other geopolitical woes. We expect limited JPY weakness over the coming months, unless the global and US reflation themes come back in full strength, which appears increasingly unlikely given mounting US political woes; stay neutral JPY.

13 June 2017

Rates & FX Market Update

Quiet Market Movements Ahead of the June FOMC Meeting

Highlights

¨   Global Markets: GBP continued to trend cautiously overnight, with the Cable 0.53% lower, after the recent upset by Labour in the snap election. Moody warned of heightened credit risks amid weaker fiscal fundamentals and the election’s potential to hinder the upcoming Brexit negotiations. The UK government’s negotiation strategy is likely to be reconsidered, possibly towards a softer Brexit stance, although the current negotiation uncertainties will continue to weigh down on the Sterling over the immediate term. Over in the EU, 10y OATs and BTPs were lifted overnight, with the former attributing to President Macron’s strong initial results in the French Parliamentary elections, and the latter attributing to likely delayed Italian General Elections till 2018 and M5S’s waning support in local elections. Recent political trends should bode well for the upcoming German elections, dispelling uncertainties over Europe’s political future amid rising populism sentiment at the beginning of the year; stay neutral EUR.

¨   AxJ Markets: Singapore’s April retail sales came in slightly better than expected (2.6% y-o-y; consensus: 2.3%) despite slowing Auto sales (-6.4% y-o-y), which have supported the indicator in previous months. USDSGD was little changed overnight amid subdued trading activities ahead of the June FOMC meeting, where consensus overwhelmingly predicted another 25bps rate hike; stay neutral SGS, with the upcoming FOMC meeting fully priced in already.

¨   USDJPY dipped 0.43% overnight and dipped under the 110 support once again, given waning risk appetite seen in riskier assets and continued cautiousness following the UK’s election and other geopolitical woes. We expect limited JPY weakness over the coming months, unless the global and US reflation themes come back in full strength, which appears increasingly unlikely given mounting US political woes; stay neutral JPY.

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