Market Roundup
• Sterling pares losses after hitting 31-year low on Brexit, ends NY -8%.
• UK markets price in BoE rate cut by year-end after Brexit shock; BoE offers more than 250 billion pounds in liquidity, SNB intervenes, ECB says will provide liquidity if needed.
• Cameron to quit (by October) after historic EU referendum defeat.
• EU's Juncker says wants to begin negotiating British departure now.
• Germany worries France, others could follow UK in leaving EU; paper recommends making UK associated partner country of EU-paper.
• Japan signals readiness to intervene as Brexit boosts yen.
• China to keep liquidity ample, yuan stable after Britain vote-central bank.
• Wall Street slides after shock Brexit vote, Futures on Wall Street’s VIX “fear gauge” jump, gold rallies.
• US Treasury prices soar on safe haven bid as UK votes to leave EU, Vote seen keeping Fed more cautious on raising rate.
• Weak US durable goods (-2.2% v -0.5% forecast) point to subdued business spending, Core capital goods orders -0.7% in May.
• U Mich final sentiment 93.5 v 94 forecast, expectations 82.4 v 83.1 forecast; 1/5-yr inflation unchanged.
• Atlanta Fed’s GDPNow sees Q2 GDP +2.6% vs 2.8% previous
• IMF's Lagarde urges smooth transition for UK, EU authorities.
• China’s Zhou: transition to market economy will ultimately be completed, central bank role will then be simplified
• Mexico cuts spending on Brexit, at ready on rates and peso.
Looking Ahead – Economic Data (GMT)
• 22:45 New Zealand Trade – Imports* May 4.01b-previous
• 22:45 New Zealand Trade Balance* May 292.0m- previous
• 22:45 New Zealand Trade Balance YY* May -3.66b- previous
• 22:45 New Zealand Trade – Exports* May 4.30b- previous
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1000 levels and currently trading at 1.1118 levels. The pair has made session high at 1.1179 and hit lows at 1.1240 levels. Euro clawed back some of its losses against the dollar after falling heavily earlier on Friday as Britons voted to quit the European Union, but markets remained volatile on uncertainty over the medium-term fallout. The euro is expected to struggle given worries about the impact of Brexit on the euro zone economy. Analysts expect months of economic and political turmoil which will dwarf the pressure on UK markets following sterling's “Black Wednesday” in 1992 when Britain was forced out of the pre-euro Exchange Rate Mechanism. The euro pared losses against the dollar after touching its lowest level against the greenback in three and a half months at $1.0914, but was still hobbling and last down 2.4 percent at $1.1098. The dollar index, which measures the greenback against a basket of six major currencies, was last up 1.96 percent at 95.358 after touching its highest level in more than three months of 96.703.
GBP/USD is supported in the range of 1.3557 currently trading at 1.3661 levels. It reached session high at 1.3938 and hit low at 1.3557 levels. Sterling pared losses against the U.S. dollar after plunging 10 percent to its weakest in 31 years on Friday following Britain's vote to leave the European Union, but still remained more than 7 percent lower on widespread market uncertainty. Sterling was last down 7.33 percent against the dollar, at $1.3654, after touching its weakest since before the 1985 plaza accord of $1.3228. Traders said Bank of England chief Mark Carney's comments that the central bank stood ready to provide extra support helped sterling recover. It came as a blow to investor confidence and the growing uncertainty that could keep the U.S. Federal Reserve from raising interest rates as planned this year, and even spark a new round of emergency policy easing from major central banks. The outcome also raised questions about the future of the European Union itself and European shares tumbled almost 10 percent before recovering some ground.
USD/CAD is supported at 1.2847 levels and is trading at 1.2977 levels. It has made session high at 1.2915 and lows at 1.2986 levels. The Canadian dollar declined sharply against U.S. dollar on Friday as a plunge in global financial markets after Britain voted to leave the European Union weighed on Canada's risk-sensitive currency. The vote to leave the European Union forced the resignation of Prime Minister David Cameron and dealt the biggest blow to the European project of greater unity since World War Two. Strategists had warned before the vote that the chances of a Bank of Canada interest rate cut would jump if Britain votes to leave, noting the result could hit global growth and spell bad news for commodity-exporting countries. The Canadian dollar was trading at C$1.2996 to the greenback, or 76.95 U.S. cents, much weaker than Thursday's close of C$1.2772, or 78.30 U.S. cents. Canadian government bond prices were much higher across the maturity curve in sympathy with Treasuries as investors rushed into safe-haven assets.
USD/JPY is supported around 101.06 levels and currently trading at 102.19 levels. It peaked to hit session high at 103.13 and made session lows at 101.93 levels. Japanese yen strengthened against US dollar on Friday, after uncertainty in the market boosted demand for the yen, which benefited from safety buying. Speculation that the Bank of Japan could also act limited the yen's advance, but the dollar was still on track for its biggest one-day drop against the yen in more than six years. Japanese Finance Minister Taro Aso said Prime Minister Shinzo Abe had instructed him to cooperate with the Bank of Japan and closely consult with Group of Seven partners in responding to market moves. Aso added that excess volatility in currency markets was undesirable and he would respond to market moves when necessary. Dollar was last down 3.5 percent against the yen at 102.18 yen after touching a more than two and a half year low of 99.11 yen.
Equities Recap
European shares plunged on Friday, dragged down by heavy losses among banking stocks as Britain's vote to leave the European Union sent shockwaves across global markets.
UK's benchmark FTSE 100 closed down by 2.76 percent, the pan-European FTSEurofirst 300 ended the day down by 6.36 percent, Germany's Dax ended down by 6.8 percent, France’s CAC finished the day down by 7.94 percent.
U.S. stocks fell sharply on Friday, with the Dow Jones industrial average dropping as much as 538 points, as Britain's vote to quit the European Union sent a shock wave through global financial markets.
Dow Jones closed down by 3.38 percent, S&P 500 ended down by 3.61 percent, Nasdaq finished the day down by 4.12 percent.
Treasuries Recap
U.S. Treasury prices jumped on Friday on safe-haven buying as rattled investors evaluated the repercussions of Britain’s vote to leave the European Union, but bonds gave up some early gains in the U.S. trading session.
Benchmark 10-year notes ended up 1-14/32 in price to yield 1.58 percent after earlier dropping to 1.41 percent, only slightly higher than a record low 1.38 percent reached in July 2012. The yield closed on Thursday at 1.73 percent.
Commodities Recap
Oil prices settled 5 percent lower on Friday after Britain's vote to leave the European Union spurred massive risk aversion and a rally in safe havens like the U.S. dollar that threatened to cut short a three-month-long recovery in global oil markets.
Brent crude settled down 4.9 percent, or $2.50, at $48.41 a barrel. It had fallen 6 percent earlier to $47.54.
U.S. crude fell 5 percent, or $2.47, to settle at $47.64, its largest one-day decline since February.
Gold soared as much as 8 percent to its highest in more than two years on Friday after Britain delivered a shock vote to leave the European Union, sending investors scurrying for protection in bullion and other assets perceived as lower risk.
Spot gold peaked at $1,358.20 per ounce and was up 4.9 pct at $1,317.20 by 2:49 p.m. EDT (1849 GMT).
U.S. gold futures for August delivery settled up 4.7 percent at $1,322.4 per ounce, off an early high of $1,362.60 an ounce.
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