Not much on the docket for today’s morning London session so price action was a bit choppy. The Swissy was clearly on a bullish rampage, though, since it just steamrolled all opposition, even though risk-taking prevailed.
And while price action on the Aussie was also choppy, the Aussie is noteworthy because there was uniform, two-way price action across Swissy pairs.
- SNB sight deposits: CHF 577,438M vs. CHF 576,402M previous
- No other economic reports released during the session
- Moody’s downgrades Australian banks on housing woes
Moody’s downgrades Australian banks
Earlier today, news hit the wires that Moody’s downgraded the long-term credit rating of some of Australia’s major banks from Aa3 to Aa2.
The affected banks not only included smaller banks, but the so-called Big Four as well, namely Australia and New Zealand Banking Group (ANZ), National Australia Bank (NAB), Commonwealth Bank of Australia (CBA), and Westpac Banking Corporation (Westpac).
Moody’s explained that in its view “elevated risks within the household sector heighten the sensitivity of Australian banks’ credit profiles to an adverse shock, notwithstanding improvements in their capital and liquidity in recent years.”
SNB sight deposits rise
According to its latest weekly press statement, sight deposits at the SNB rose from CHF 576,402 million to CHF 577,438 million during the week ending on June 16.
This implies that the SNB was up to its usual trick of sneakily intervening in the forex market to weaken the Swissy yet again.
Oh, for the forex newbies out there, sight deposits are very easy to withdraw and transfer and sight deposits, particiularly sight deposits of domestic Swiss banks, are part of the monetary base, so they are one of the main tools used by the SNB for currency purchase operations (*cough* market manipulation *cough*).
Risk-taking in Europe
Europe is starting the new trading week on an optimistic note since most of the major European equity indices were in the green.
- The pan-European FTSEurofirst 300 up by 0.70% to 1,538.06
- Germany’s DAX was up by 0.86% to 12,862.50
- The blue-chip Euro Stoxx 50 was up by 1.14% to 3,579.00
U.S. equity futures also got a lift from all that risk-taking.
- S&P 500 futures were up by 0.35% to 2,439.50
- Nasdaq futures were up by 0.87% to 5,733.50
Market analysts attribute the risk-on vibes to Macron’s parliamentary victory in France, as well as bargain-buying of retail and tech shares after the two got dumped hard last week.
Major Market Mover(s):
Despite the risk-on vibes and signs of probable currency intervention by the SNB, the Swissy ended up as the one currency to rule them all during the session.
No clear reason for the Swissy’s strength, but it’s possible that Brexit-related uncertainty ramped up safe-haven demand for the Swissy. After all, Brexit talks will start later today and no word yet on a deal between Theresa May’s Conservative Party and the DUP.
USD/CHF was up by 30 pips (-0.30%) to 0.9710, EUR/CHF was up by 35 pips (-0.32%) to 1.0867, GBP/CHF was up by 20 pips (-0.16%) to 1.2419
The Aussie had a mixed performance during the session and some Aussie pairs even closed flat for the session. Even so, the Aussie is interesting because there was uniform two-way action.
Specifically, the Aussie initially took a dive, apparently because of Moody’s downgrade on Australian banks. However, the Aussie later regained some poise, likely because of the risk-on vibes and the rise in iron ore prices.
AUD/USD was down by 3 pips (-0.05%) to 0.7608 with 0.7585 as session low, AUD/CAD was up by 3 pips (+0.03%) to 1.0074 with 1.0050 as session low, AUD/JPY was down by 2 pips (-0.02%) to 84.49 with 84.28 as session low
Watch Out For:
- 2:30 pm GMT: CB’s Australian leading index (0.5% previous)
- 3:00 pm GMT: Deutsche Bundesbank President Jens Weidmann will speak
- 11:00 pm GMT: Chicago Fed President Charles Evans has a speech