Funda-FX wrap: risk elevated despite tentative N.Korea /US summit and Italian politics

Funda-FX today was scarce in any gamechanger type of headlines, but that didn’t stop risk form bouncing with AUD/JPY with a look in at the 83 handle, copper running up some ground to the 200-hr SMA and USD/JPY trading better bid throughout the session – (The VIX was trading at 13.59 (-7.11%), well below the average level this year at 17.11). Solid US data and better commodity prices all helped to lift US indices 0.3-0.8% higher.

On the geopolitical front, North Korea released an angry statement saying it might pull out of the meeting that was due to take place on 12 June in Singapore if the US insisted it gave up its nuclear weapons.

“The president is ready if the meeting takes place; If it doesn’t, we’ll continue the maximum pressure campaign that’s been ongoing,”

– White House spokesperson Sarah Sanders.

Trump has since reiterated that the US would still insist on denuclearization.

Across the pond, Italian coalition negotiations were the focus where policy discussion of government debt writedowns and larger deficits saw their 10-year yields surge 16bps and remains uncertain if Di Maio and Salvini can work out the final remaining stumbling blocks – Rabobank

Key headlines, (source: LiveSquawk):

  • Fed’s Williams: Fed’s era of market hand-holding is nearing an end.
  • Fed’s Bostic: rate hikes this year is the correct path.
  • Fed’s Bullard: need to see upside surprises to support further hikes – BBG TV.
  • Fed’s Bullard: yield curve has a nice slope, currently no danger of invested yield curve – BBG TV.
  • BoC’s Schrembri: rates are below neutral because of NAFTA uncertainty.
  • Mexico independent candidate zavala said to quit presidential race.
  • British pm may defeats labour party attempt to force the government to reveal details of Brexit customs proposals.
  • Treasury selloff pauses after 10-year yield hits a 7-year peak.
  • Dollar index hits 2018 high, havens yen and Swiss also rise.
  • US Pres. Trump defends ZTE action as us and China talk trade deal.
  • EU withdrawal bill suffers 15th defeat in lords.
  • Italian govt plan said to not list euro exit option.
  • US industrial production clocks third straight month of gains.

Key notes:

  • Fed’s Williams: not worried by yield curve, won’t ignore its signal
  • A “bomb” to Italy’s political establishment – Italy’s 5-Star/League agreeing on the joint policy programme
  • BOC Schrembri: NAFTA uncertainty is impacting business investment
  • Fed’s Bullard: need to see upside surprises to support further hikes – Bloomberg TV
  • Fed’s Williams: not worried by yield curve, won’t ignore its signal


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