• European bourses are modestly pressured, Euro Stoxx 50 -0.3%, amid a relatively quiet session featuring banks & energy names as the laggards; ES -0.1%
• The DXY remains elevated though failed to retain 92.00 as US yields pulledback, with FX peers pressured and energy-exposed FX lagging
• BoJ maintained policy settings as expected and extended pandemic relief measures by six months
• NHC issued a tropical storm watch for the Mexican Coast and Chevron has reportedly withdrawn some staff
• Looking ahead, highlights include Fed's Kashkari and quadruple witching

CORONAVIRUS UPDATE

UK could reportedly end the lockdown two weeks early with Downing Street said to be open for a potential end of restrictions on July 5th if the data continues to improve. (Daily Mail) In-fitting with reports prior the reopening delay announced on Monday

Japanese experts' report noted there is a possibility that holding the Olympics would add to the burden on Japan's medical system and noted that holding the games without spectators would allow a maximum reduction to the risks of infection spreading, while it suggested it is important to scale down Olympics as much as possible. (Newswires)

Taiwan said it is continuing discussions with BioNTech (BNTX) regarding COVID-19 vaccine purchases with the help of the German government, while it added that BioNTech told Foxconn's founder that it will only sell vaccines to governments. (Newswires)

ASIA

Asian equity markets were sluggish following the mixed lead from Wall Street where the mood was indecisive amid an unwinding of inflation hedges, looming quadruple witching and following weaker than expected US data, although tech outperformed and the NDX posted a fresh record high helped by a pullback in yields. ASX 200 (+0.1%) was led higher by tech as the sector found inspiration from US peers although upside in the broader market was limited by commodity-related losses with energy names dragged after WTI crude briefly dipped beneath USD 70/bbl. Nikkei 225 (-0.2%) lacked conviction amid an unsurprising BoJ policy conclusion in which the BoJ maintained policy settings as expected and extended pandemic relief measures by six months beyond the September deadline as was flagged by source reports, although Eisai was the biggest gainer due to a global strategic collaboration with Bristol Myers Squib in which Eisai will receive USD 650mln and also be entitled to as much as USD 2.45bln in milestones. Hang Seng (+0.9%) and Shanghai Comp. (-0.1%) were varied with the mainland bourse weakened by lingering tensions with the West, while outperformance in Hong Kong was driven by tech and retailers as JD.com celebrated its birthday with the 6.18 shopping festival and with Anta Sports also lifted after forecasts of a minimum 110% jump in H1 net. Finally, 10yr JGBs were marginally higher after yesterday’s bounce back from support at 151.50, but with price action very quiet as Japanese stocks were kept rangebound and amid a lack of fireworks from the BoJ policy announcement.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.4361 vs exp. 6.4333 (prev. 6.4298)

US President Biden's executive order which seeks to safeguard data of Americans, would force some Chinese apps to take tougher measures to protect private information if they want to stay in the US market, according to sources. It was also reported that the US Commerce Secretary may negotiate with companies to curb risks of apps linked to foreign adversaries and US is talking with allies on taking a similar stance, while app firms may object or propose measures after unacceptable risk is determined. (Newswires)

Chinese officials are reportedly drafting plans to further loosen birth restrictions by 2025, according to WSJ citing sources; additionally, China will likely begin removing such restrictions in provinces where the birth-rate is low. (WSJ)

BoJ kept policy settings unchanged as expected with rates kept at -0.10% and 10yr JGB yield target maintained at 0.0%, while it extended the pandemic relief programme by six months beyond the September deadline with the decision on YCC made by 7 votes for, 1 vote against and 1 abstained with Kataoka the dissenter and Masai the abstainer. BoJ said the economy remains in a severe state but is picking up as a trend, while exports and output are increasing steadily although it downgraded the assessment of consumption which it stated is stagnating. Furthermore, the BoJ said it will introduce a new scheme to back finance climate change loans and expects to roll out new climate change scheme at year-end with the outline of the scheme to be released at next month's meeting. (Newswires)

BoJ's Kuroda says they need to continue with monetary easing to achieve the inflation goal even post-COVID, the domestic economic outlook is brighter than before. Not considering reducing/ending ETF purchases. (Newswires)

• Japanese National CPI (May) Y/Y -0.1% vs. Exp. -0.2% (Prev. -0.4%)
• Japanese National CPI Ex. Fresh Food (May) Y/Y 0.1% vs. Exp. 0.1% (Prev. -0.1%)
• Japanese National CPI Ex. Fresh Food & Energy (May) Y/Y -0.2% vs. Exp. -0.3%

US

US President Biden hasn’t publicly indicated if he will re-nominate Fed Chair Powell although Democrats close to the administration said there is a chance he'll make an announcement by Labor Day which will be well ahead of the end of Powell’s term in February. (Axios)

US President Biden signed a bill for a new Juneteenth federal holiday on June 19th to commemorate the end of slavery in US. SIFMA stated it is not recommending a fixed income market close as June 19th falls on a Saturday this year but will incorporate the new holiday into the holiday schedule going forward, while the NY Fed also stated Juneteenth will be incorporated into the desks' operations schedules and reference rates publication policies going forward. (Newswires)

US chip investment would reportedly receive a 25% investment tax credit in the bipartisan bill. (Newswires)

UK/EU

The EU is reportedly prepared to agree to a three-month extension, regarding the Northern Ireland meat issue, in an attempt to avert a "sausage trade war". (Times)

CBI sees UK output to return to pre-pandemic levels by end-2021 which is a year earlier than it had previously forecast. (FT)

Northern Ireland's DUP leader Poots has quit amid criticism from within the party regarding concessions to nationalists. (FT)

UK Retail Sales MM (May) -1.4% vs. Exp. 1.6% (Prev. 9.2%); YY (May) 24.6% vs. Exp. 29.0% (Prev. 42.4%)

• Ex-Fuel MM (May) -2.1% vs. Exp. 1.5% (Prev. 9.0%); YY (May) 21.7% vs. Exp. 27.3% (Prev. 37.7%)

Bank of England/Kantar Inflation Attitudes Survey - May 2021: Median expectations of the rate of inflation over the coming year were 2.4%, down from 2.7% in February 2021. (BoE)

BofA forecasts a 15bp rate hike from the BoE in May 2022. (Newswires)

GEOPOLITICAL

US Secretary of State Blinken spoke to Israel Foreign Minister Lapid about need to improve Israeli-Palestinian relations in practical ways, while it was separately reported that Israel's IDF conducted a drone strike against a Hamas position in northern Gaza. (Newswires/Twitter)

North Korean leader Kim said North Korea is prepared for both dialogue and confrontation with the US. (Yonhap/KCNA)

EQUITIES

European cash markets have adopted more of a downside bias in recent trade (Euro Stoxx 50 -0.3%) following a rather directionless cash open amid light news flow and a somewhat anaemic calendar on Quad Witching day (full schedule available on the Newsquawk headline feed). The breadth of the price action remains narrow across European cash and futures. US futures meanwhile trade horizontal with the NQ faring better as yields drift lower and following yesterday’s unwind of reflationary bets. Back to Europe, sectors are mixed with no overarching theme nor biases – with Oil & Gas and Banks at the foot of the bunch given the pullbacks in crude prices and yields. Basic Resources again suffer amid the recent collapse in base metal prices. The upside sees Industrials benefiting from the lower raw material prices. In terms of individual movers, Tesco (-2.3%) is softer despite an overall positive trading update, as participants ponder future valuation as the COVID-induced sources of revenue face downside risks as the economy reopens. Meanwhile, CAC-listed Alstom (+2.0%) capitalises on news of a EUR 1.4bln order. Elsewhere, Carnival (-0.7%) is softer amid reports of a data breach, although US-listed shares closed lower by 3% yesterday.

Intel's (INTC) notebook CPU market share could decrease to a record low in 2022, according to sources. (DigiTimes)

FX

USD/JPY/EUR - The Dollar remains dominant and in the ascendency overall, albeit not universally in wake of Wednesday’s watershed moment when the Fed tilted more hawkishly on rates and started the chat about when it might be timely to talk about tapering its asset purchases. Using the index for reference, a marginal new post-FOMC high has been recorded at 92.071 vs 92.010 yesterday, but the DXY and Greenback in general look somewhat fatigued ahead of the weekend and in need of another catalyst to continue their already impressive recovery rally. However, Friday’s agenda does not bode well for additional impetus given nothing scheduled in the US, while a myriad of hefty option expiries and technical or psychological levels may work to keep the Buck in check. On that very note, the Yen has rebounded further from lows to probe 110.00 where 1.45 bn expiry interest resides following no changes in policy from the BoJ and marginally above forecast Japanese CPI, while the Euro has reclaimed 1.1900+ status, albeit still shy of 1.7 bn expiries between 1.1940-50, to leave the index sub-92.000, though off the current 91.806 session base.

GBP - Sterling has lost another big figure vs the Dollar and briefly dipped below chart support in the form of a 61.8% Fib retracement of Cable’s rise from April trough to June peak at 1.3891 in wake of considerably worse than expected UK retail sales data, but held just above the half round number below irrespective of a slowdown in inflation expectations for the next 12 months via the BoE/Kantar attitudes survey. Meanwhile, the Pound has unwound gains relative to the Euro having failed to sustain a minor break above 0.8550, though the 21 DMA chimes with 0.8600 and could offer chart support to supplement sentimental bids.

CHF/AUD/CAD/NZD - The Franc has managed to arrest its post-SNB slide ahead of 0.9200 and 1.0950 against the Greenback and Euro respectively, while the Aussie is still bearing the brunt of weakness in metals and other commodity prices under the 200 DMA, but holding above 0.7500 vs its US counterpart with some assistance via the Aud/Nzd cross that remains elevated in the high 1.0700s. Consequently, or coincidentally, the Kiwi is struggling to regain 0.7000+ status and the Loonie is pivoting 1.2350 amidst a deeper retracement in oil prices and awaiting Canadian new house prices for some independent direction.

SCANDI/EM - No lasting traction for the Nok from Thursday’s hawkish-leaning Norges Bank rate guidance, while the Sek still seems cautious about political uncertainty before Sweden’s PM faces his vote of confidence as both trade closer to weekly lows against the Eur circa 10.2200 and 10.2100 respectively. Conversely, EM currencies are either consolidating, paring losses or maintaining corrective bounces vs the Usd as the end of a hectic and largely bad week draws to a close, with the exception of the Brl on further policy normalisation from the BCB and Rub due to a degree of conciliation between Russian and US Presidents.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.1900 (686M), 1.1940-50 (1.7BLN), 1.1975-80 (720M), 1.2000 (620M), 1.2065-70 (1.2BLN), 1.2100-10 (4.0BLN)
• USD/CAD: 1.2160 (1.6BLN), 1.2200 (1.6BLN), 1.2225 (1.1BLN)
• USD/JPY: 109.50 (625M), 110.00 (1.45BLN), 110.50 (250M)
• AUD/JPY: 84.15-20 (1.3BLN)

Westpac's Chief Economist expects the RBA to commence their tightening cycle in Q1-2023, expecting full employment and inflation conditions to be met by this point and for wage growth to be near 3%. (Newswires)

FIXED

Bunds, Gilts and US Treasuries have all carved out new intraday highs, albeit somewhat unconvincingly if not quite reluctantly, as they remain shy of this week’s current pinnacles, and in some cases also their post-Fed rebound peaks. Nevertheless, at 172.67, 127.79 and 132-11 before drifting back, the 10 year benchmarks traded 23, 46 ticks and 10/32+ over par vs -3, +15 and -2/32+ at the other end of the spectrum and even more divergent from Eurozone periphery debt that might be reflecting on hawkish ECB commentary from Weidmann in the absence of much else even though his views about ending PEPP were personal and hardly a shock given his well known leanings.

COMMODITIES

WTI and Brent front month futures remain caged following yesterday’s losses which saw WTI Jul’21 briefly dip under USD 70/bbl. The benchmarks are now consolidating on a 70-handle and 72-handle for WTI and Brent respectively. In terms of forces at play, the unwind of the reflationary trade yesterday, coupled with the firmer Buck keeps upside moves capped. However, summer demand is expected to remain robust, with the EU also lifting travel restrictions for US citizens this morning – in-fitting with reports earlier in the week. Meanwhile, Iranian nuclear talks remain in the balance on the day Iranians head to the poll. Although officials have reassured that the elections will not affect JCPOA talks, analysts have cautioned not to dismiss the risk of disruption. Furthermore, the IAEA monitoring agreement with Tehran is set to expire on June 24th, but IAEA officials have signalled a potential extension if needed. Elsewhere, the Gulf of Mexico is on watch for a possible tropical cyclone – which is expected to bring heavy rain to the Northern Gulf Coast later today, according to the NHC. Overnight reports suggested that Chevron has withdrawn staff from US Gulf of Mexico offshore facilities due to the weather warnings. In terms of banking commentary, Goldman Sachs believe that in the near term, long oil is the highest conviction trade - and still sees Brent averaging USD 80/bbl in Q3 with potential spikes above the level. Turning to metals, spot gold and silver have been drifting higher as the metals retrace yesterday’s hefty losses with the aid of a pullback in yields and the Buck – with the former around its 100 DMA at USD 1,794/oz (vs low USD 1,772/oz) and the latter gaining ground above USD 26/oz (vs low 25.86/oz). Analysts at GS believe the yellow metal is undervalued relative to both real and nominal fundamentals. LME copper consolidates around the USD 9,250/t mark but Shanghai futures slipped overnight. Finally, Dalian coking coal futures pulled back from earlier gains after reports of China's State Planner and Market Regulator commencing an investigation into coal prices.

NHC announced that the potential tropical cyclone is about 475 miles south of Morgan City, Louisiana with maximum sustained winds of 30 miles per hour; since issued a tropical storm watch for the Mexican Coast. In relevant news, Chevron (CVX) withdrew staff from US Gulf of Mexico offshore facilities due to the potential tropical storm and Occidental Petroleum is also implementing storm procedures at its Gulf of Mexico offshore facilities. (Newswires)

CME raised platinum futures initial margins for speculators by 15% to USD 5,060 per contract and raised palladium futures NYMEX initial margins for speculators by 14.8% to USD 34,100 per contract. (Newswires)

China's State Planner and Market Regulator has commenced an investigation into coal prices. (Newswires)