HALISTER1: Won May Pivot More on Fed Speak as BOK Seen as Holding: Analysis

Won May Pivot More on Fed Speak as BOK Seen as Holding: Analysis

(Bloomberg) -- With Bank of Korea expected to leave rates unchanged at its policy meeting tomorrow, the direction of USD/KRW may be impacted more by U.S. data and Fed speakers, Bloomberg strategist David Finnerty writes.
  • BOK will probably leave its 7-day repo rate unchanged at 1.25%, according to all 20 economists surveyed by Bloomberg; central bank surprised in June by cutting it 25bps; decision due July 14
  • Higher-than-expected U.S. payroll data last Friday spurred risk-on for EM markets, though investors also raised the possibility of a Fed rate hike this year to 34% from 12%
    • Won surged as much as 1.6%, the most in a month, on Monday after the payroll data
    • If upcoming U.S. data, including CPI on July 15, or speeches by Fed officials don’t further increase probability of a hike, USD/KRW may move lower to test support at 1,128.35, April 20, as risk-on sentiment prevails
    • FX pair may test 50-DMA resistance if probability of a Fed hike rises
  • BOK’s comments on capital flows will also be watched as markets continue to digest ramifications of Brexit; in June statement it highlighted capital flow movement amongst items that it “will closely monitor any changes in.”
  • NOTE: David Finnerty is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
1206Z KS (Bank of Korea/The)

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HALISTER1: Aussie Could Test May’s High If Jobs Beat Expectations: Analysis

Aussie Could Test May’s High If Jobs Beat Expectations: Analysis

(Bloomberg) -- AUD/USD may extend this month’s rally and test resistance at 0.7719, the high on May 3, in the near-term if Australian payrolls beat forecast, Bloomberg strategist David Finnerty writes.
  • June employment is expected to rise by 10k jobs, with unemployment rate climbing to 5.8% from 5.7%, according to median ests. of economists in survey; data due July 14 at 11:30am local
  • The FX pair has recouped post-Brexit losses of almost 4%, supported by several factors:
    • Smaller probability of Fed tightening this year; on June 1, there was a 76% chance of a hike by Dec.; now it’s near 34%
    • Lack of an explicit easing bias in the RBA’s July policy statement
    • NAB business confidence and conditions, with both showing better June sentiment despite uncertain outcomes for Brexit vote and Australian election
  • Higher-than-forecast payrolls may further reduce pricing for an RBA cut in Aug., which has fallen from 59% at the beginning of this month to near 45% now
  • AUD/USD’s MACD remains bullish with reading above zero and signal line
  • Slow stochastics are bullish with %D reading of 72 and rising; FX pair is steady at 0.7620
  • NOTE: David Finnerty is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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