Sterling Slumps Post BOE Rate Hike; Dollar Climbs

Euro Tumbles on Soft EZ PMIs; AUD, EMFX Fall

Summary:

The Bank of England hiked its Key Interest Rate 50 basis points to 5%, higher than the 0.25% increase markets had expected. Sterling (GBP/USD) initially spiked to 1.2730 before easing to close at 1.2700.

Softer Eurozone PMIs weighed on the EUR/USD pair, down to 1.0905 at the New York close against its opening at 1.0955 Friday. The shared currency slumped to 1.0845, overnight and one-week lows.

Eurozone June Flash Manufacturing PMI fell to 41 from 43.2 previously, and lower than analyst’s expectations at 44.8. Services PMIs dropped to 52.4 from 55.1, missing estimates at 54.5.

The Dollar Index, which measures the value of the Greenback against a basket of 6 major currencies climbed 0.45% to 102.85 from 102.40 Friday. Overnight, the USD/DXY traded to a high at 103.17.

The Greenback rebounded against the Japanese Yen (USD/JPY) to 143.52, up from its 143.12 opening on Friday. Overnight, the USD/JPY pair traded to a 143.73 high.

The Australian Dollar (AUD/USD) fell against the Greenback to 0.6682 down from its Friday open at 0.6756. The Kiwi (NZD/USD) finished at 0.6138, down from 0.6178.

Against the Emerging Market and Asian Currencies, the Greenback rallied. The USD/CNH (Dollar-Offshore Chinese Yuan) soared to 7.2100 against Friday’s open at 7.1950. USD/SGD (US Dollar- Singapore Dollar) soared to 1.3520 from 1.3450.

Global stocks fell as risk sentiment soured following weaker global economic data. The DOW slid to 33,717 (33,958) while the S&P eased to 4,350 from 4,385. Other global share markets were lower.

Other economic data released on Friday saw the UK June Flash Manufacturing PMI drop to 46.2 from 47.1. However, UK June Services PMI slid to 54.1 from 57.2. Annual UK May Retail Sales fell -2.1%, after falling 3% previously. UK Services PMI slid to 54.1 from 57.2.

US S&P Global Manufacturing PMI in June tumbled to 46.3 from 48.5. However, US S&P Services PMI rose to 54.1, beating expectations at 54.0.

GBP/USD – Sterling was pounded down to 1.2700 in late New York after climbing to 1.2745 Friday. Overnight, the British Pound slid to a low at 1.2688 before steadying. The overnight low traded for Sterling was at 1.2694.EUR/USD – The shared currency closed at 1.0905, down from 1.0955. The Euro slid to an overnight low at 1.0890 before steadying at the close. Lower European and Eurozone PMIs weighed on the EUR/USD pair. Germany’s Manufacturing PMI slid to 41 from 43.2.USD/JPY – The Greenback rallied to a 143.52 finish in late New York, up from its opening at 143.12. In choppy trade, the overnight high recorded was at 143.73. Japan’s Flash Manufacturing and Services PMIs both eased in June against the previous month.AUD/USD – Against the overall stronger US Dollar, the Aussie Battler fell to 0.6682 at the New York close from 0.6758 Friday. Overnight low recorded was at 0.6673 while the high traded was at 0.6717.On the Lookout:

We begin the last week of June with a light economic calendar today.

Japan kicks off today’s data releases with its April Leading Economic Indicator (f/c 97.6 from 96.9– FX ACY Finlogix).

The Bank of Japan releases its BOJ Summary of Opinions (the Bank of Japan’s projection for inflation and economic growth).

Germany starts off Europe with its June IFO Business Climate Index (f/c 90.7 from a previous 91.7 – ACY Finlogix).

The UK follows next with its CBI June Distributive Trades (f/c 0 from -10 -ACY Finlogix).

Canada kicks off North America with its Canadian Preliminary May Manufacturing Sales (m/m f/c 0.1% from 0.3% - ACY Finlogix).

The US rounds up today’s data releases with its Dallas Fed June Manufacturing Index (f/c -26.5 from -29.1 – ACY Finlogix).

Trading Perspective:

The Dollar rebounded against most of its rivals as interest rate divergence widened between the US and the rest of the globe.

On Friday, the US 10-year treasury bond yield settled at 3.72% down 8 basis points from Friday’s opening (3.79%).

However, rival global bond rates dropped further.

Germany’s 10-year Bund yield slid to 2.35% from 2.49%.

While the UK 10-year Gilt yield settled at 4.31% from 4.36%, economic data released on Friday slowed more than expected.

UK Global PMIs fell more than expected. Analysts believe that higher UK interest rates will push the UK into a recession.

In contrast, US bond rates climbed after Global Services PMI in June rose.

While we can expect the Greenback to maintain its bid tone today, traders should watch the USD/JPY pair today.

This morning, Japan’s top currency diplomat, Masato Kanda warned that authorities will respond to FX moves if they become excessive.

USD/JPY – Expect more fireworks in this currency pair today as Japanese officials ramp up their rhetoric against a weakening Yen. After closing at 143.52 in New York, the USD/JPY pair has dropped to 143.30 currently. Look for immediate support at 143.10 to hold initially. The next support level is found at 143.00 and 142.70. On the topside, look for immediate resistance at 143.75 (overnight high traded was 143.73). The next resistance level lies at 144.10. Look for another choppy trading day in the USD/JPY, likely between 142.70-143.70.EUR/USD – The shared currency slid to 1.0905 from Friday’s open at 1.0955. Currently, the Euro trades at 1.0908 USD. Look for immediate support at 1.0890 (overnight low) followed by 1.0860. Immediate resistance can be found at 1.0915 (overnight high traded was 1.0912). The next resistance level lies at 1.0930 and 1.0950. Look for the Euro to trade in a likely range of 1.0850-1.0950 today. Prefer to sell rallies.AUD/USD – The Aussie Battler slid against the overall stronger Greenback to 0.6682 from 0.6756. The overnight low traded was at .06673. Currently, the AUD/USD pair trades at 0.6675. Look for immediate support at 0.6650 followed by 0.6620 to hold. Immediate resistance lies at 0.6710 followed by 0.6740. While the Aussie trades heavy, am not bearish at current levels. Likely trading range today: 0.6660-0.6760. Prefer to buy Aussie dips.GBP/USD – Sterling fell to 1.2700 against its opening at 1.2745. On the day look for immediate support at 1.2690 (overnight low traded was 1.2694). The next support level is found at 1.2660. Immediate resistance is found at 1.2720 followed by 1.2750. Look for the GBP/USD pair to trade in a likely range of 1.2670-1.2770. Trade the range.

(Source: Finlogix.com)

Happy Monday and trading all. A top week ahead.

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