9:30 AM via UBS
We haven’t seen anything special in USDJPY and yen crosses, but the pair has traded through its 100-day and the 200-day moving averages. While a lot of short-term positions seem to be getting squared up, I don’t see much value in playing short here, and will be buying on dips instead.
7:30 AM Stocks
US equities were stronger again on Monday, the S&P raising a further 1.2% as investors continued to digest the extraordinary beat on May payrolls reported on Friday. To recap: headline US nonfarm payrolls rose by a little over 2.5mn in May with private payrolls increasing by a bit over 3mn. Still, the economy’s critical issue is whether people will spend the savings they accumulated during the lockdown.
7:00 AM Gold and FX
With zero chance of the Fed easing back on the policy pump, the June FOMC presents little threat to gold from a policy perspective. But with the board looking to experiment with YCC, it may take the edge of rising US yields if they focus on this mechanism which, on the margins, should be positive for gold – or at least allow gold to come up for air
Still, the yellow metal is on a reasonably steady downtrend, most likely on the back of the great run in equity markets over the past few weeks which could see fast money continue to sell on rallies. But the global central bank money printing machines should ultimately lend support in the more medium term.
“Risk on” currencies (AUD) are mostly consolidating near recent highs with little news of note to trigger much action to start the week.
Friday’s particularly strong US employment data has likely helped support expectations for a sharp recovery. However, before the considerable NFP data surprise, most high-frequency prints showed that business is reviving in fits and starts globally as lockdown measures are easing, particularly around retail sectors.
6:00 AM Oil Markets
Oil is trading lower but very rangy into Asia open despite OPEC extending Q2 production cuts and addressing non-compliance. There was always a good chance we’d see profit-taking after the strong run into the meeting, especially with news of the start-up in Libya’s el-Shahara field after the most recent ceasefire.
There might be some disappointment that the cut extension came in at the bottom end of the 1-3 month range that had been speculated on in the press. Even the critical takeaway that the group has sought to address (under-compliance, especially as it pertains to backdated compensation) has been flagged as smoke and mirrors by some analysts. At the same time, over-compliance from Saudi Arabia and other GCC producers is not expected to continue.