Morning Markets: USDJPY breaks 104.0 as hapless BoJ watches on
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- US: Housing Market Index (1400 GMT)
USDJPY broke 104.0 in the hour before the European session hitting 103.62 at 0638 GMT and continues to hover in the 103.70 zone after the Bank of Japan decided to hold off from a fresh flood of stimulus despite a Brexit-propelled strengthening of the yen.
The Nikkei was heading for a 3%-plus slide on-day as the muscular yen hammered the export-led exchange and it may well be that faced with the potential EU-exit headwind, the BoJ felt an intervention at this stage may have been swept aside in a tsunami of fear. Next month might offer the beleaguered central bank a more opportune moment for a currency move once the Brexit fallout has filtered its way through the system.
Federal Reserve chair Janet Yellen's extremely dovish performance at the Federal Open Market Committee meeting Wednesday evening had already put the dollar on the defensive and sparked the latest flight to the safe-haven yen after she warned that the Brexit fear necessitates a step-by-step approach to raising interest rates. July is not ruled out as a possibility for the next hike in the cycle but then it is hardly ruled in either.
The Brexit debate descended into farce Wednesday as a bout of gunboat diplomacy on the River Thames that would have made Lord Palmerston proud saw UKIP leader and 'Leave' campaign luminary Nigel Farrage square up to former rock star and Live-Aid inspiration Bob Geldof.
While the broadsides remained verbal — Geldof bellowed "you're a fraud" at an outraged Farrage through a megaphone — the bizarre episode perhaps reflects a backdrop that suggests it is the 'Leave' campaign that is gathering momentum as Bloomberg's Brexit tracker jumped to a 39% chance for a UK exit next week, up 14 percentage points on Monday.
Gold meanwhile has sprinted beyond $1,300/oz and 10-year German bund yields returned to negative territory again as investors seek the right home for their cash.
There's just one week now to go to the referendum. It's been kicking off in the European football championships in France — quite literally among some of the less savoury elements of the supporters — and it is kicking off in markets too. Fear and loathing rules the day.
- The Fed turned dovish, due to Brexit uncertainty and soft jobs numbers
- Japan's Nikkei 225 retreated, giving up even more than Wednesday's gains
- The BoJ held rates steady, causing the yen to move higher
- Australia created 17,900 new jobs in May, slightly above the expected 15,000
- Its unemployment rate remained the same at 5.7%
- The S&P/ASX200 headed higher at the start before giving up its gains in late trade
- New Zealand's GDP rose 0.7% in the first quarter, against expectations of 0.5%
- The US dollar lost ground against the yen; it was worth just ¥105.6300 at 0106 GMT
- The Australian dollar surged above 0.74; it was worth 0.7425 at 0105 GMT
- The NZ dollar edged higher; it was worth 0.7081 at 0107 GMT
From the Floor
How low. "The next level on USDJPY is 100.75 in technical terms", says Hardy.
Golden days. "We're trading up 1.6% and we still have the Brexit vote to come which is why gold could target the 2014-high of 2014", says Hansen.
Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.
The Bank of England is unlikely to raise interest rates today but will be trying to manage expectations in light of next week's Brexit vote, writes James Picerno.
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Bond markets have been the subject of a growing bubble discussion lately, a view that Michael Boye says gained further traction this week when German bunds moved into negative territory for the first time on record.
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