Saxo Bank Head of FX Strategy John Hardy reports that the euro continues its ascent despite Italian yields continuing to rise with key EURUSD flashpoints at 118.25, 119.25, and of course 1.20.
Article / 08 June 2016 at 7:00 GMT

Morning Markets: Oil and gold rally as USD wilts




  • UK: NIESR GDP Estimate (1400 GMT) 
  • US: Job Openings and Labor Turnover Survey (1400 GMT) 
  • Switzerland: HICP inflation (0715 GMT)
  • New Zealand: RBNZ monetary policy decision (2100 GMT)

With the US dollar broadly weaker gold is continuing its rally while crude oil is successfully defending the psychologically important $50/barrel level, bolstered by dollar weakness and expectations of inventory declines. This is the first time that both global oil benchmarks – Brent and WTI  – have simultaneously closed above $50 since July last year.

Gold, meanwhile, is being helped by negative bond yields and the risk of a British decision to exit the EU in the June 23 referendum and the uncertainty that that would entail. Brexit, and more specifically a new opinion poll giving a slim lead to the Remain side, spurred sterling higher overnight, indicating the British currency's increasing sensitivity to these polls.

In the Asian session it emerged that Japan’s current account and trade surpluses narrowed in April. But investors shrugged off the bleak news releases, and the Nikkei 225 headed higher. Finally in Australia, an overnight pickup in iron ore prices was not enough to prevent share price tumbles for top miners, which sent the S&P/ASX200 into a slide.

Market signals

Asian session

  • New Zealand's manufacturing sales volumes fell 2.6% in the first quarter
  • Both Japan’s current account and trade surpluses narrowed in April
  • Its current account surplus was ¥‎1.878 trillion; its trade surplus narrowed to ¥‎697.1bn 
  • China's May exports fell by 4.1% from a year earlier, while imports slipped by 0.4%
  • This left the country with a trade surplus of $49.98 billion for the month
  • The Nikkei 225 was slightly up at 0515 GMT to 16,766
  • At the same time the Shanghai Composite was down 0.5% to 2921
  • Bets are waning on a New Zealand interest-rate cut tomorrow
  • The Reserve Bank of New Zealand is facing renewed pressure in the housing market 
  • The S&P/ASX200 was down 0.2% at 0515 GMT to 5362

Forex ahead

  • The flagging US dollar failed to make any gains against the yen
  • The US dollar was worth just ¥106.9685 at 0110 GMT
  • Commodity currencies, including the Australian and NZ dollars, gained ground
  • The Australian dollar was worth 0.7452 at 0109 GMT

From the Floor

Ugly bonds. “Why would investors buy bonds now? It’s about mitigating risk prior to the Brexit vote”, says Fasdal.

Reaching high. “Oil is really important for equities at the moment with Brent pushing through $51/b”, says Garnry.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Today’s GDP report from NIESR will reveal how the UK economy is performing on the eve of what may be Britain's most important political decision in a generation, James Picerno writes.

Rally riddle

Everybody was asking why the GBP rallied 130 pips so quickly on no apparent news, says Saxo's Singapore trading team, and the answer is "we don’t know".

Fed direction

The May nonfarm payrolls surprise is behind us but the consequent reassessment of the Fed's policy goals is very much still ongoing, writes Neil Staines.

 Japan's trade surplus narrowed in April, in a sign of the pain that the high yen has brought to the world's third-largest economy. Photo: iStock

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