Halister News

(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.