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The ASX200, Nikkei and Hang Seng are all looking to open in the positive after a mostly positive lead from Wall St with all major US indices but the Dow eking out gains despite ongoing debt ceiling headwinds and some hawkish Fed speak. The Russell 2000 saw strong advances, aided by a bounce in regional banks with PacWest (PACW) surging after announcing the sale of real estate loans.
Asian markets will be watching private surveys on Australia and Japan’s manufacturing and services activity released today.
Debt ceiling negotiations in the US were ongoing with some cautious optimism on “productive” talks helping risk appetite in the markets, though there is still no agreement, and it is likely these negotiations will go to the 11th hour as they have in the past, the markets optimism may not last long.
We also had a slew of Fed speakers in Monday’s session, a decidedly hawkish tone was the narrative, pushing back on market expectations of a “dovish” Fed anytime soon.
USD was mostly firmer on Monday although within contained ranges, The US Dollar Index hitting a high of 103.370 and a low of 102.960, underpinned by hawkish remarks from Fed members Bullard and Kashkari and ongoing uncertainty in debt ceiling negotiations.
AUD and NZD were marginally firmer against the USD, with the Kiwi outperforming its counterpart, held up by market participants awaiting the anticipated RBNZ 25bps hike on Wednesday. Although, desks note the risks of a 50bps hike have increased since NZ budget. AUDNZD closing below it previous 2023 lows set in April to close at 1.0559.
JPY was the G10 laggard and saw losses against the USD as USDJPY hit a peak of 138.69 to test last week’s highs and resistance level. The Yen underperformed on wider Treasury/JGB yield differentials rather than any Japanese specific news.
The Swiss Franc was the G10 outperformer and appeared to track strength from its haven properties or short covering impetus, as opposed to anything Swiss-specific. USDCHF trading between 0.8941-98.
Today’s economic calendar is light on US releases, but we do have multiple UK and Eurozone manufacturing and service PMI’s. The UK figures will be the ones to watch with the markets still split on the BoE’s next rate move in June.
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