FX Pulse

OVERNIGHT

    The U.S. dollar ended lower against most G10 peers as risk aversion from the Brexit outcome subsided, but pared some losses after the third reading of U.S Q1-GDP came in at 1.1%, above expectations for 1.0%. Fed’s Powell (voter) said global economic risks have shifted further to the downside in the wake of Brexit. He added that Fed is ready to act if liquidity or funding pressures rise.

    GBP/USD led with 0.9% gain to 1.3344, first up day since Brexit but is still more than 11% off referendum day’s high of 1.5018. EU summit overnight provides no new insights on when Article 50 would be invoked as outgoing PM Cameron reiterated to his other 27 EU counterparts that it is the job of the new PM to trigger the procedures to leave EU. EUR/USD added 0.3% to 1.1065, trading comfortably in the 1.1000/1.1100 range for now. ECB President Draghi told EU leaders that Euro GDP could decline as much as 0.5% for the next 3 years cumulatively after Brexit. USD/JPY ended higher by 0.7% to 102.75 from 102.00, benefiting from stabilization in stocks and treasury yields. A Reuters report that Japanese government and BOJ officials are to meet on Wed morning to discuss market moves also lent some support for the pair. AUD/USD added 0.7% to 0.7386; further gains could be limited due to upcoming federal elections on 2-Jul.

    Regional currencies gained against the USD, led by IDR which surged 1.2% to 13,178 per dollar after the much awaited tax amnesty bill was finally passed into law. Given the move was already within market’s expectations, further impact on the IDR is likely to be constrained and given the uncertainties around Brexit, we are retaining our forecast for USD/IDR at