The World and the Dollar Await the Trump Tweet

Earlier in the Day:

Key stats released through the Asian session this morning were limited to May trade figures out of Japan.

For the Japanese Yen, the trade balance slid from a ¥625bn surplus to a ¥578bn deficit in May, the deficit greater than a forecasted ¥235bn, coming off the back of a larger than expected rise in imports.

• Year-on-year, imports rose by 14%, which was greater than a forecasted 8.2%, following April’s 5.9% rise.
• Exports rose by 8.1%, coming in ahead of a forecasted 7.5% rise and April’s 7.8% increase.

The deficit was the first since January’s ¥943bn deficit, as the trade surplus with the U.S slumped by 17%, while exports to China jumped by 13.9%, as focus on Japan’s trade figures heightened amidst the U.S administration’s review of its global trade policies, with aluminium and steel trade tariffs already imposed.

Overall, the solid export numbers were positive from a global economic and Japan perspective, with the rise in imports being indicative of strong demand. By region, only exports to Western Europe declined in May, attributed to a fall in exports to both the UK and Italy.

The Japanese Yen moved from ¥110.664 to ¥110.606 against the U.S Dollar upon release of the figures, before rising to ¥110.510 at the time of writing, up 0.14% for the morning.

Elsewhere, the Aussie Dollar was up 0.03% to $0.7444, while the Kiwi Dollar was down 0.1% to $0.6942, the pair lacking any direction following last week’s losses, as the markets look towards the Oval Office and Beijing for direction on trade, while both China and HK markets are closed today.

In the equity markets, the Nikkei was down 0.92% ahead of the close, while the ASX200 was up 0.29%, the Nikkei struggling following the trade figures and the uptick in the Japanese Yen through the morning, as concerns over the prospects of a trade war weigh. While Australia is not under the Oval Office microscope, supporting the ASX200, Japan is under scrutiny and May’s narrowing in the trade surplus may not be enough.

The Day Ahead:

For the EUR, there are no material stats scheduled for release through the session, with the EUR at the mercy of the Oval Office and Beijing, though Italy is also there to throw a curveball at the markets ahead of a busy week of central bank chatter.

ECB President Draghi could provide the EUR a boost should he flip flop from last week’s ECB press conference later today, but with so much geo-political risk and the threat of trade wars circulating, there’s little reason for the ECB President to talk up the EUR, particularly when the economy has struggled through the first 5-months of the year.

At the time of writing, the EUR was down 0.15% to $1.1593, policy divergence and the threat of trade tariffs on the EU contributing to the EUR’s decline.

For the Pound, it’s also a quiet day on the data front, with the lack of stats through the week allowing the markets to focus on Thursday’s monetary policy decision and Brexit noise from Parliament and Brussels.

At the time of writing, the Pound was down 0.07% to $1.3269, with Brexit chatter the key driver through the day.

Across the Pond, the lack of stats through the day puts the spotlight on FOMC member chatter in the wake of last week’s shift in outlook towards rate hikes for the remainder of the year.

FOMC Members Dudley, Duke, Bostic and Williams are scheduled to speak through the day, with Williams and Dudley of greater influence from a policy perspective.

At the time of writing, the Dollar Spot Index was up 0.06% to 94.849, with FOMC member chatter and noise from the Oval Office the key drivers through the day, any continued rhetoric between the U.S and China likely to cause some alarm across the markets.

Across the border, the lack of stats out of Canada will keep focus on NAFTA and trade tariffs, with OPEC’s meeting later in the week also there to give the Loonie some moves this week, a slide in oil prices and lack of progress on trade talks likely to see the Loonie begin easing towards C$1.32 levels against the U.S Dollar.

BoC Governing Council Member Patterson, scheduled to speak later in the day, could provide some support though if its risk off through the day, there’s going to be very little that Patterson will be able to say, other than talk of a rate hike, to ease pressure on the Loonie.

At the time of writing, the Loonie was up 0.04% to C$1.3179, the gains barely making a dent in the close to 2% slide last week.