Market Roundup
• Flat yield curve? Not to worry, Fed policymakers say.
• Fed's Brainard: U.S. outlook consistent with "continued gradual" rate hikes.
• Trump rails against high oil prices, OPEC pushes back.
• Democrats sue Russia, Trump campaign for alleged 2016 election conspiracy.
• CA Mar CPI Inflation m/m, 0.3%, 0.4% forecast, 0.6% previous.
• CA Mar CPI Inflation y/y, 2.3%, 2.4% forecast, 2.2% previous.
• CA Mar CPI BoC Core m/m, 0.2%, 0.7% previous.
• CA Mar CPI BoC Core y/y, 1.4%, 1.5% previous.
• Canada, Mexico laud NAFTA progress, ministers to reconvene Tuesday.
• Weak euro zone data will not slow ECB normalization -sources.
• Euro zone economy needs global growth, open trade: ECB's Draghi.
• Euro zone consumer confidence rises in April.
• Bank of England rate rises shouldn't be "glacial" - Saunders.
• Italy's Berlusconi smears 5-Star, urges government deal with left.
• Britain confident in Brexit talks, sees no return to hard Irish border
Looking Ahead - Economic Data (GMT)
• 23 Apr 00:30 Japan Apr Nikkei Mfg PMI Flash, 53.1 previous
Looking Ahead - Events, Other Releases (GMT)
• April 21 N/A World Bank’s Jim Yong Kim participates in Panel Discussion on " Building Human Capital: A Project for the World" in Washington, D.C.
• April 23 19:30 Bank of Canada's Stephen Poloz and Carolyn Wilkins participate in House of Commons Standing Committee on Finance in Ottawa
Currency Summaries
EUR/USD is likely to find support at 1.2244 levels and currently trading at 1.2281 levels. The pair has made session high at 1.2312 and hit lows at 1.2249 levels. Euro weakened against the dollar on Friday and is poised for its biggest weekly drop in two months as investors trimmed record high bets before a European Central Bank meeting next week where policymakers are largely expected to signal no change in policy. The European Central Bank meets next week and expectations have grown that policymakers may take another small step in exiting its ultra-easy monetary policy after dropping a long-standing pledge to increase its bond buying if needed at its last meeting in March. Forward guidance will thus likely be left unchanged next week, while Draghi’s tone should be relatively dovish. The euro hit $1.2251, the lowest in about two weeks. It was last trading down 0.61 percent, at $1.2281, putting it on track for it steeply weekly drop in two months. Despite slipping to $1.2251 on Friday, the single currency has traded within a broad 1.21 to 1.25 range for much of this year even as long euro positions have swelled to a record $23 billion. The dollar firmed, after U.S. President Donald Trump apparently made no new fresh demands on trade at his meeting with Japanese Prime Minister Shinzo Abe earlier this week. An index that tracks the greenback versus a basket of six currencies rose 0.5 percent, to 90.39 after touching a near two-week high.
GBP/USD is supported in the range of 1.3962 levels and currently trading at 1.4014 levels. It reached session high at 1.4080 and dropped to session low at 1.4008 levels. Sterling fell half a percent to a fresh two-week low against the dollar on Friday after Bank of England Governor Mark Carney signalled that the central bank may not raise interest rates in May because economic data was "mixed”. Investors had this week pushed the pound, one of the best performing major currencies in 2018, to its highest level since the Brexit referendum in June 2016, in part because of growing expectations the BoE would increase rates next month to curb inflation. But after weaker-than-expected wage growth and inflation data this week, Carney told the BBC on Thursday that a May rate rise was not a given and that there were other BoE meetings later in the year. Markets are now pricing in a 40 percent chance of a 25 basis point rise in May, down from an almost 70 percent chance before Carney spoke. The pound fell 0.5 percent to a day's low of $1.4008, its lowest since April 6, as broad dollar strength kept the pound under pressure in late US trading. On Thursday, sterling slid close to 1 percent and the British currency is now down 1.5 percent this week, barely holding on to gains for April, which is normally a strong month for the pound. Against the euro, however, sterling recovered on Friday as the single currency suffered losses across the board. The pound rose 0.2 percent to 87.52 pence per euro.
USD/CAD is supported at 1.2600 levels and is trading at 1.2752 levels. It has made session high at 1.2752 and lows at 1.2629 levels. The Canadian dollar weakened to an 11-day low against its U.S. counterpart on Friday after data showed domestic inflation rose less than expected, with the currency extending its decline since the Bank of Canada held interest rates steady two days ago. Canada’s annual inflation rate in March edged up to 2.3 percent from 2.2 percent in February, the highest level in more than three years, Statistics Canada said. Still, it was less than the 2.4 percent forecast by analysts, while the Bank of Canada's three measures of core inflation were little changed. The central bank left its benchmark interest rate on hold at 1.25 percent on Wednesday and said it did not know when or how aggressive it would need to be to keep inflation in check. Chances of an interest rate hike in May were little changed at 35 percent after the data, the overnight index swaps market showed. In separate data, Canadian retail sales grew by 0.4 percent in February as higher sales at auto dealerships and general merchandise stores outweighed widespread weakness in other sectors, Statistics Canada said. Analysts had expected a 0.3 percent gain. The Canadian dollar was last trading 0.4 percent lower at C$1.2752 to the greenback.
AUD/USD is supported around 0.7648 levels and currently trading at 0.7666 levels. It hit session high at 0.7684 and made session lows at 0.7655 levels. The Australian dollars hit multi-day low on Friday and is set to finish the week in the red as traders wagered interest rates will remain at record lows for a long time to come in Australia. The Australian dollar fell as deep as $0.7707, the lowest since April 10. It was last down 0.2 percent at $0.7712. The retreat came as the Aussie again tested the 200-day moving average at $0.7815 only to run into heavy speculative selling. The Aussie has been on a downward trend since February, falling in 9 out of the past 12 weeks on a cocktail of negative factors including a tariff dispute between the United States and China. A full-blown trade war could prove damaging for Australia's export-heavy economy. This week, it was disappointing data on Australia's labour market that unsettled investors. Just 4,900 net new jobs were added in March, well short of forecasts for 21,000 while February was revised to show a 6,300 fall rather than the original 17,500 increase. The tepid number led many to wager that consumer prices in Australia due next week will be lukewarm too. Analysts forecast March quarter core inflation stuck at 1.8 percent, below the central bank's target band of 2-3 percent. Traders say a weaker number could see the Aussie down to $0.7650 where critical support lies amid bets the Reserve Bank of Australia (RBA) would lag other major central banks in this tightening cycle.
Equities Recap
European shares held steady on Friday at the end of a strong week as a rally in commodities softened, although strong earnings updates boosted shares in Ericsson and Telia.
UK's benchmark FTSE 100 closed up 0.5 percent, FTSEurofirst 300 ended the day up by 0.01 percent, Germany's Dax ended down by 0.2 percent, and France’s CAC finished the day up by 0.3 percent.
U.S. stocks fell on Friday, as Apple led a decline in technology stocks amid fears about weak iPhone demand and investors worried about the impact of a rise in U.S. bond yields on equities.
Dow Jones closed down by 0.83 percent, S&P 500 ended down 0.85 percent, Nasdaq finished the day down by 1.28 percent.
Treasuries Recap
The 10-year Treasury yield reached its highest level since March 21 as the bond selloff continued for a second day on Friday, driving the yield curve steeper after two weeks of flattening.
The two-year Treasury yield was last at 2.449 percent, above its last close. The 10-year Treasury yield was last at 2.945 percent, a monthly high, though still below the 2.957 percent of Feb. 21, which was the highest level since January 2014.
Commodities Recap
Gold prices eased on Friday and were on track to end the week lower as the dollar advanced on expectations of higher U.S. interest rates and market players grew a bit less worried about global political and security risks.
Spot gold lost 0.6 percent at $1,336.96 per ounce by 1:36 p.m. EDT (1736 GMT), while U.S. gold June futures settled down $10.50, or 0.8 percent, at $1,338.30. Spot gold was headed for a weekly decline of nearly 1 percent.
Oil prices edged up on Friday, stabilizing after an earlier slide driven by U.S. President Donald Trump's criticism of OPEC's role in pushing up global oil prices.
Brent crude oil futures gained 28 cents, or 0.4 percent, to settle at $74.06 per barrel. West Texas Intermediate crude futures for delivery in June, the most active U.S. contract, were up 7 cents at $68.40. The May WTI contract, which expired on Friday, gained 9 cents, or 0.1 percent, to settle at $68.38.
