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Market Macro Wrap 30 Jun 17
USD and JPY are the weakest currencies among the G10 this week and understandably so because Fed and BoJ were the only major central banks that were reserved in their comments this week. CAD, EUR and GBP got a boost from Poloz Draghi and Carney, respectively as they all caught the markets wrong-footed by making relatively hawkish comments at the ECB Forum in Sintra, Portugal.
The European markets fell sharply following hawkish comments by the central bankers at the ECB forum and this coincided with a sharp sell-off in the US and German government bonds with both countries yields rising sharply this week; the US and German 10-year yields were up 12bp and 20bp, respectively.
In the energy space, the Brent crude futures jumped 6.0% to $47.70 above $47.00 mark in over two weeks despite the EIA crude inventory showing a build up of 118K while a draw of over 2.0mn was expected. The outlook for crude looks positive given the improvement in growth outlook.
In the Scandinavian currencies, the Swedish Krone had a turnaround (strongest currency for the week) as traders became wary of a potentially hawkish Riksbank next week. Elsewhere, NOK fell sharply in the initial part of the week but losses were curtailed following a recovery in oil and better retail sales.
Looking ahead, the market will focus on the Manufacturing PMIs early on Monday to assess global economy with positive data likely to add to the risk-on sentiments. The RBA policy meeting on Tuesday and FOMC minutes on Wednesday will be keenly watched but the main focus will be on US NFP data on Friday.