Daily Market Digest: Brexit Talks Dominate On A Slow Moving Day

Image via www.bankofengland.co.uk / Flickr. Photographer: James Oxley

British industry and key officials are weighing in on the outcome of the Brexit vote on a day where most of the Europe is closed due to Whit-Monday holiday. The US NY Fed Empire state manufacturing index showed a contraction in May.

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Japan PPI falls 0.30% in April

Producer prices in Japan fell 0.30% on a month over month basis in April, data from the Bank of Japan showed on Monday. The 0.30% decline missed estimates of a 0.20% increase. Japan’s PPI fell 0.10% in March. On a yearly basis, producer prices in Japan fell 4.20% missing estimates of a 3.70% decline and extending March’s decline of 3.80%. Export prices gained 0.70% in the month but were down 4.20% on the yearly basis while import prices increased 0.80% on a month over month basis but fell 13.70% on the year. Last week, BoJ officials came out strongly against the yen’s appreciation with finance minister Taro Aso threatening to intervene in the currency markets. However, ahead of the G7 meetings due to take place in Tokyo starting this Friday any intervention is unlikely. The yen managed to give up some of the gains last week trading above 108 levels for the most part. However, not all analysts are convinced that USD/JPY will move higher.

Taisuke Tanaka, Deutsche Securities chief FX strategist notes “The USD will likely head lower to Y105 or below in the next several weeks, due to the U.S. slowdown, China worries and difficulty for Tokyo to intervene to stem the yen strength.” Tanaka said that over the short-term, the US dollar might not gain the downside momentum ahead of upbeat data such as housing starts, [inflation, building permits] due tomorrow, but says that “a narrowing of… US economic growth remains as the biggest focus for the dollar against the yen.” Tanaka expects the dollar to fall to 103Yen at end June.