- Some semblance of stability returned to financial markets today in anticipation of further monetary stimulus from policy makers. Asian stock markets rebounded and European equities have followed suit with the Euro Stoxx 50 currently up 2.33%; FTSE100 at +1.95% and German DAX at +1.85%.
- Following Moody’s footsteps, S&P cut the UK’s debt rating to AA from AAA.
- UK outgoing Prime Minister David Cameron has ruled out the possibility of a second EU vote.
- Nominations for the next UK Prime Minister are scheduled to close this Thursday, 30 June. The election process involving both the Parliamentary Party and grassroots leaders then takes place in July/August. Cameron’s successor is expected to be announced by Friday, 2 September.
- Despite the improvement in optimism, the fallout from Brexit on UK based banks continues to cause concern. The key structural uncertainty is these banks’ ability to hold onto existing EU ‘passporting” rights. Currently, banks based in the UK are allowed free passporting of their services into the EU. Post Brexit, these rights disappear and the negative operational implications of this development will subdue revenues in the financial sector.
- Stepping away from the continuing Brexit saga, US PMI data came in lower than expected at 51.3 (expectation was 52.0). May 2016’s reading was also 51.3.
- US exports declined 0.5% m/m s.a. in May after posting a 2.4% uptick the previous month. Falling automotive exports and capital goods shipments contributed to the lower export number.
- US imports grew at a 1.4% pace, lower than the previous month’s reading of 2.5%.
- Spot 1.3551
- Resistance remains at the 1.3600 handle
- Spot 0.7400
- Move above 0.7530 needed for AUD to strengthen towards the 0.7650 handle
- On the downside, a breach of 0.7350 sees AUD lower at 0.7305.
- Spot 1.2979
- Sustained weakness below 1.3000 sees immediate USD support at 1.2935 and then 1.2850
- Above 1.3085 brings resistance at 1.3170 to 1.3175
- Spot 6.6812
- On-shore yuan fixed lower by 0.23% today at 6.6528 (vs 6.6375 yesterday)
- Yuan fixing has been lowered 1.3% since the start of this week