Forex Insider Daily Update 9 June 2017

Major Bank Daily Position

USD/JPY - Citi - SHORT Position - From 110.45 - Adjusted - Stop from 111.70 to 110.45, Target: unch. (TOTW-M/T)

EUR/AUD - Crédit Agricole - SHORT Position - From 1.5095 - Adjusted - Stop from 1.5230 to 1.5040, Target: unch. (M/T)

USD/JPY - Citi - SHORT Position - From 110.45 - Adjusted - Target from 108.15 to 109.50, Stop: unch. (TOTW-M/T)

AUD/USD - UOB - LONG Limit Order - Adjusted - Stop from 0.7455 to 0.7470, Entry: unch., Target: unch. (S/T)

BTMU

BTMU holds a bullish view on NZD into year end on the ground on the following 4 reasons:

1.    The RBNZ places importance on its own Survey of Expectations which was released in May for Q2 and revealed a jump in 1 year inflation expectations from 1.56% to 1.92% and 2 year inflation expectations from 1.92% to 2.17%, the highest level since Q3 2014.

2.     Speculative positioning in NZD has undergone a rapid change from a record long position to a short position, which may well now be prone to being reversed again.

3.       Option flows also show a turn toward more positive NZD sentiment.

4.    Continued positive global growth may well prompt a shift in message from RBNZ later this year given the greater prospect of a more sustained pick up in inflation.

SocGen

SocGen notes that political distractions hinder fiscal progress in the US and political uncertainty plays its part in keeping bond yields where they are.

“An optimistic view of the ex-Director of the FBI’s testimony is that is could help reduce the uncertainty, one way or the other.

More realistically, maybe once it’s out of the way the underlying performance of the economy, which is dull rather than weak will drive markets. If that’s the case, we’d look for slightly higher yields, but not big enough move to de-rail global yield hunters.”

For now, US yields especially TIPOS, are holding lower end of rangers rather than breaking free, and we expect USD/JPY and EUR/JPY to do the same, before moving higher.

NAB

NAB notes that there were 2 key changes to the ECB policy announced today; the removal of its easing bias and upping of the balance of risks on economic growth to broadly balanced from negative.

“Together the moves confirm the ECB has started the process of very gradually pulling back from its super easy emergency policy measures put in place to deal with deflationary risks,” NAB argues.

The FOMC meeting next week will clearly be influential and especially it’s longer –term dot projections, but in the slightly bigger picture we see nothing here from ECB to tempt us away from thinking the EUR is gradually repricing to a higher range.

ABN AMRO

ABN AMRO comments on today’s ECB meeting in which the central bank changed its forward guidance, dropping the easing bias in terms of interest rates, in what is the first step in the path towards the exit from its unconventional policy.

ABN AMRO base case for the ECB going forward:

1)      A tapering of asset purchase from January 2018 onwards, with the monthly pace slowing by EUR 10 bn each month.

2)      Tapering based on limits to extending programme through 2018 given issue limits rather than the inflation outlook.

3)      We think inflationaty pressures will remain weak for sometime to come, but the ECB could sell tapering on the stronger economic recovery story.

4)      We expect the ECB to signal a tapering of asset purchases at the September 2017 meeting, when it will make further changes to its forward guidance.