The US dollar is narrowly mixed against the major currencies. The drop in oil prices (3.3% this week) is seen as one of the factors that may be underpinning the appetite for fixed income, and this, in turn, is lifting the yen. The greenback had approached JPY112 yesterday, but with the drop in oil prices and yields has seen it retreat toward JPY111.00.Â
Sterling has been unable to recover from BOE Governor Carney’s push back against the MPC hawks. Uncertainty spurred by Brexit, and the squeeze on wages, a key fuel for consumption and growth offsets in what Carney suggested was the transitory effect of the past decline in sterling. Sterling fell below the 100-day moving average yesterday (~$1.2630) for the first time since mid-April. The 200-day moving average is seen closer to $1.2555. The 38.2% of this year’s rally (~$1.2640) had offered support until yesterday and now may serve as resistance. The 50% retracement is seen near $1.2520. Â
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Prime Minister May’s Queen Speech, which opens up a two-year parliamentary session followed the question time. It is rather aggressive to open the parliamentary session without securing the agreement with the DUP, even support as a minority government. The UK faces several economic and social challenges, but the self-chosen exit from the EU may prove so distracting and yet demanding of resources and attention, that little else gets done. Â
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The euro is consolidating yesterday’s losses that saw it approach the late May low near $1.1110. This is seen as the lower end of the $1.11-$1.13 range that has confined the single currency for four weeks. With a light new stream, the large options that expire today may be important. At $1.1155, there is nearly 750 mln euro that roll-off, and another 570 mln with a $1.1180 strike. Almost a yard of euros is struck at $1.12.  Separately, we note a JPY111.30 strike for a little more than $800 mln also is on the block today. Â
