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[MARKET ANALYSIS] High yielding FX outperform as trade thins amid lack of macro catalysts

Newsquawk Staff ·

  • Lack of macro catalysts with geopolitical news light as US-Iran negotiations pause for the former Supreme Leader’s funeral processions. The Buck today is seemingly attracting carry demand as we near summer trade, where ING notes G7 FX volatility is close to the lower end of long-term ranges. As thinner trade approaches, several desks, including JPMorgan and ING strategy, recommend carrying high-yielders NOK and GBP conform to the narrative today. (NOK/SEK +0.4%, AUD/NZD +0.4%, GBP/USD U/C)
  • The US week kicks off with a couple of data points, ISM Services PMI and the final read of the US S&P Global Services PMI. The speaker slate today is light, though it features the influential Fed’s Waller, who will take part in a policy panel. Later in the week are FOMC minutes, which are expected to be hawkish, and the first which features Warsh as Chair.
  • JPY is the clear underperformer, as it attempts to return to recent lows against most peers. Specifically, USD/JPY +0.5% on the day as the Buck outperforms against low yielders and after unconvincing potential intervention over the past week. USD/JPY sees its first resistance at 162.509 to the upside; thereafter, the next significant level is the 1st July high of 162.84.
  • Antipodeans are mixed, Aussie outperforms as it attracts carry demand as mentioned above, while Kiwi is one of the G10 laggards as hawkish bets unwind ahead of the RBNZ policy announcement on Wednesday. Ahead of the meeting, the NZIER Shadow Board recommended that the RBNZ hold the OCR at 2.25%, against the market consensus of a 25bp hike to 2.50%. AUD/NZD +0.4% and approaches 1.2200.

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