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EUROPEAN OPENING NEWS INCLUDING: US President Obama agrees to send military advisers to Iraq

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• Asia-Pacific markets trade quietly, with a slow Friday calendar looking to continue the trend on the final trading day of the week. Nonetheless, quadruple witching in the US and a slew of futures and options expiries in European equities and fixed income could keep price action volatile. 

• Yesterday, gold benefitted from aggressive short-covering, rising to mid-April highs of USD 1,322/oz as USD-weakness and the dovish FOMC prompted an unwind of short-positions. 

• US President Obama agrees to send military advisers to Iraq but keeps the option of targeted military action on the table in the future after deciding against sending combat troops. 

ASIA

JGBs trade 3 ticks higher at 145.37, in a relatively quiet session with the BoJ not offering to buy JGBs under its purchase program. Asian equity markets trade mixed amid light news flow and a lack of tier-1 macroeconomic data, with the Nikkei 225 flat although on track for a fifth weekly gain after closing at near a 5-month high yesterday. Elsewhere, there is notable underperformance in the Shanghai Comp (-0.6%) which is poised for its biggest weekly loss in 2 months, amid concerns that IPO resumptions will divert funds from existing equities. The Hang Seng trades up 0.2%. 

EUROPE

European newsflow remains thin ahead of the weekend, with focus turning to speeches from ECB’s Mersch & Coeure today. 

UK 

BoE's McCafferty said there didn't seem to be any material shift in expectations about what we might do. McCafferty said if the BoE were to have to raise rates I think it would have been damaging if it was portrayed as a surprise. (Guardian) McCafferty’s comments were infitting with the recent rhetoric from the BoE. 

The BoE’s Prudential Regulation Authority said it is ready to impose limits on a bank’s balance sheet growth to ensure its governance and risk-monitoring systems are up to scratch. (FT) 

FX 

The USD-index extended on yesterday’s losses following a break below its 200DMA which modestly benefited major USD pairs and crosses. Nonetheless, news flow remained light which prompted subdued price action across the board ahead of the weekend. 

COMMODITIES

WTI crude futures trade up USD 0.20 at USD 106.63 ahead of today’s Jul-14 futures expiry. Elsewhere, copper futures rose underpinned by USD weakness as prices broke above the 50DMA to the upside, although the move higher was capped by the 100DMA at USD 3.0966. Yesterday, gold rallied over 3% after a short-covering breached the USD 1,300/oz handle. 

GEOPOLITICAL

US President Obama said combat troops will not be returning to Iraq and that the US will send up to 300 military advisers. Obama said can take targeted military action if the situation requires. (CNBC) 

US

USTs finished higher yesterday although off best levels as the FOMC induced rally eased throughout the session. The move lower gathered momentum following strong Philly Fed survey and the 10y yield broke back above 2.6%. At the pit close, T-notes settled up 3+ ticks at 124.10+. Overnight, T-notes ebbed higher in thin volumes to trade up 2+ ticks at 124.13+ as of 0615BST.

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