USDJPY Marches Higher
USDJPY was the stand-out mover during an Asia session which was quieter than usual on account of a China holiday. US 2y yields were mostly unmoved and heavy yen selling out of Tokyo was inspired largely by FX technicals. Earlier, Moody’s downgraded the ratings of several global investment banks, although there was no further market reaction after the headlines hit, given the news had been leaked hours earlier by a TV channel. The meeting of Eurozone finance ministers concluded without any apparent agreement on any substantive issue. The question of how to handle the delicate ESM seniority issue was not resolved, and a decision will now be deferred until the EU summit on June 28-29. EFSF Chief Regling said that given Eurozone loans to Spain would amount to less than 10% of Spain GDP, the question of seniority is not as important as is sometimes believed. IMF Managing Director Lagarde, who also attended the meeting, sounded somewhat exasperated afterwards. She said that the Eurozone needs a fiscal union and a banking union with several elements – including regulatory supervision, deposit insurance, and a bank resolution mechanism. She also noted that the ECB has room to provide additional support via the SMP or traditional monetary policy. Eurogroup Chair Juncker confirmed that Greece will receive the EUR 1 bn previously withheld by end-June. Meanwhile the economic data flow from the US remained on the soft side, with jobless claims printing 387k to push the four-week moving average to 386k (the highest since December 2011), May existing home sales falling 1.5% m/m, and the June Philadelphia Fed manufacturing index plunging to -16.6 from -5.8 in May.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank