• The swaps market is pricing in a 70% probability of a 25bp RBNZ cut at the next meeting (on 6/8) and only 18% chance for the RBA on 6/7
• RBNZ Governor Wheeler says he is increasingly concerned about the Auckland housing market. Says it is increasingly driven by speculation…it is not feasible to increase rates in the foreseeable future. he is ‘seriously’ looking at more macro prudential measures.
• The computers have won. Institutional Investor just released its annual list of the top-earning hedge fund managers, and six of the top eight are quants, or managers who rely on computer programs to guide their investing. The list includes Ken Griffin of Citadel, Jim Simons of Renaissance Technology, and John Overdeck and David Siegel of Two Sigma. In 2002, by contrast, just two computer-driven investors were included in the ranking, according to Institutional Investor. The list highlights just how hedge fund investing has changed over the past 15 years. It is not that the brash, characterful traders of old are a dying breed. There are still plenty of alpha-male risk-takers in a company gilet wandering around New York and Greenwich, Connecticut.
• The AUD/USD pair took-out Tuesday’s high, although failed to sustain at higher levels and drifted lower over the last hour. AUD/USD back below hourly 100-SMA at 0.7387 Currently, the AUD/USD pair rises 0.12% to 0.7372, now heading towards session lows struck at 0.7362 in opening trades. The Aussie is seen trimming gains, with markets taking profit off the table after the rate reversed from just below 0.74 barrier. However, the prices remain underpinned on the back of upbeat second-tier economic news from Australia, with both the consumer sentiment and home loans data bettering expectations. While risk-on rally in the Asian equities combined with higher oil prices also keep the downside cushioned in the AUD/USD pair.

On data front, we have little of note for the major in the day ahead, except for the crude oil inventory data, and hence, the risk-on/off sentiment persisting in the markets will dominate the moves across the fx board.

• The GBP/JPY pair’s reversal from 158.00 handle gained momentum, dragging the pair back below 157.00 level just ahead of the UK manufacturing and industrial production data…..

…..Since the beginning of this week, the pair had witnessed a sharp recovery of nearly 400-pips from last week’s low of 153.86. The recovery momentum now seems to face some fresh supply near 158.00 level on broad safe-haven buying of the Japanese currency, Yen.

…..The ongoing concerns over the ‘Brexit’ coupled with the recent disappointing PMI reading seems to force traders to unwind their GBP long bets in expectations of a yet another weak print. However, should there be a positive surprise, GBP pairs, including the GBP/JPY pair, are likely to witness an immediate recovery.

• The big morning mover has been the Kiwi/Dollar, printing a huge bullish hourly candle before giving back some knee-jerk gains as sanity around this morning’s Financial Stability Report takes hold. The report’s core discusses the notion that the financial system in New Zealand is healthy, but low dairy prices and house prices remain key risks. “Imbalances in the housing market are increasing with house price inflation lifting again in Auckland, after cooling in late 2015 and early 2016 following new restrictions in investor loan-to-value ratios and government measures introduced in October.”
• Big oil is dipping a few more toes into clean energy. Exxon Mobil Corp. is partnering with a company to capture carbon-dioxide emissions from power plants. Total SA, the French oil supermajor, announced a $1.1 billion deal Monday to buy the battery maker Saft Groupe SA, complementing its 2011 purchase of a majority stake in the solar-panel maker SunPower Corp. And the Canadian pipeline company Enbridge Inc. announced Tuesday it will pay $218 million for stakes in offshore wind farms as it attempts to double its low-carbon generating capacity.
• Best/worst performers in majors vs USD today: NZD: 0.6%, JPY: 0.4%, CHF: 0.2%, GBP: 0.0%, AUD: -0.1%, CAD: -0.2%.
• Best/worst performers in Commodities today: XAGUSD: 0.7%, Copper: 0.4%, USOil: -0.1%, UKOil: -0.1%.