Market Roundup
• Italy's anti-establishment leaders revive governing coalition.
• Fed vigilant as Italy poses some risk to global growth – Brainard.
• US Apr Consumption, Adjusted MM, 0.600%, 0.400% forecast, 0.400% previous.
• US Apr Personal Consump Real MM, 0.400%, 0.400% previous.
• US Apr Personal Income MM, 0.3%, 0.3% forecast, 0.3% previous.
• US Apr Core PCE Price Index YY, 1.800%, 1.800% forecast, 1.900% previous.
• US Apr PCE Price Index YY, 2.000%, 2.000% previous.
• US w/e Initial Jobless Claims, 221k, 228k forecast, 234k previous.
• US w/e Continued Jobless Claims, 1.726 mln, 1.749 mln forecast, 1.741 mln previous
• US w/e Jobless Claims 4-Wk Avg, 222.25k, 219.75k previous
• US May Challenger Layoffs, 31.517k, 36.081k previous
• US May Chicago PMI, 62.7, 58.0 forecast, 57.6 previous
• US Apr Pending Homes Index, 106.4, 107.6 previous
• US Apr Pending Sales Change MM, -1.3%, 0.4% forecast, 0.4% previous
• CA Q1 GDP QQ Annualized, 1.3%, 1.8% forecast, 1.7% previous
• CA Q1 GDP QQ, 0.3%, 0.4% previous
• CA Mar GDP MM, 0.3%, 0.2% forecast, 0.4% previous
• U.S. hits allies with tariffs as trade war fears rise
• U.S. steel tariffs a concern as G7 finance ministers meet in Canada
• Trump plays down chances of quick breakthrough; N. Koreans bring letter
Looking Ahead - Economic Data (GMT)
• 31 May 22:45 New Zealand Q1 Terms of Trade QQ, -1.5% forecast, 0.8% previous
• 31 May 22:45 New Zealand Q1 Terms of Trade - Exp Vol, -2.0% forecast, 2.6% previous
• 31 May 22:45 New Zealand Q1 Terms of Trade - Imports, 0.0% forecast, 4.0% previous
• 31 May 22:45 New Zealand Q1 Terms of Trade - Exports, -1.5% forecast, 4.9% previous
• 31 May 23:30 Australia May AIG Manufacturing Index, 58.30 previous
• 31 May 23:50 Japan Q1 Business Capex (MOF) YY, 4.3% previous
• 1 Jun 00:30 Japan May Nikkei Mfg PMI, 52.5 previous
• 1 Jun 01:00 Australia Oct HIA New Home Slaes m/m, -6.1% previous
• 1 Jun 01:45 China May Caixin Mfg PMI Final, 51.0 forecast, 51.1 previous
Looking Ahead - Events, Other Releases (GMT)
• 00:30 Dallas Fed's Rob Kaplan speaks at the 61st Annual Southwestern Graduate School of Banking Keynote Banquet in Dallas
• 10:00 Riksbank Governor Stefan Ingves visits Skane and talks about current monetary policy issues at a lunch seminar in Landskrona, Sweden
• 12:55 Minneapolis Fed's Neel Kashkari participates in a panel discussion on "collaborative strategies to build tomorrow's workforce" in Minneapolis
• 13:10 Bank of England chief economist Andy Haldane gives lecture in Glasgow, Scotland
Currency Summaries
EUR/USD is likely to find support at 1.1508 levels and currently trading at 1.1686 levels. The pair has made session high at 1.1708 and hit lows at 1.1638 levels. The euro rose higher against US dollar on Thursday as euro was boosted after Italian parties made last-ditch efforts to form a government and avert elections, going some way towards easing concerns about the impact of a political crisis there. The rise of a potentially eurosceptic government in Italy and the impact that could have on the stability of Europe has seen the euro fall 3.5 percent this month as the dollar has bounced back.A degree of calm, however, has returned with two anti-establishment parties renewing efforts to form a viable coalition. The euro climbed half a percent to a three-day high of $1.1725 on Thursday, having risen 1.1 percent the previous day, its second-biggest daily gain this year. It hit a 10-month low of $1.1510 on Tuesday. An underlying theme that has pushed the euro lower since mid-April is an economic slowdown in Europe and the subsequent retreat in expectations for an early rate hike from the European Central Bank. Weaker-than-expected economic data from euro zone has raised questions about whether the ECB will, as expected, wind down its 2.55 trillion-euro stimulus programme by the end of this year and raise interest rates towards the middle of next year.
GBP/USD is supported in the range of 1.3226 levels and currently trading at 1.3290 levels. It reached session high at 1.3347 and dropped to session low at 1.3275 levels. Sterling edged higher against the dollar on Thursday as the greenback fell across the board as worries about an Italian political crisis and new U.S. trade tariffs dominated market trading. The pound traded up 0.4 percent at $1.3334, moving away from six-month lows of $1.3205 hit on Tuesday. It later gave up some of those gains to trade flat at $1.3288. A more than month-long rally by the dollar stalled on Thursday, when the euro rebounded as two anti-establishment parties in Italy made last-ditch efforts to form a government and avert snap elections.The dollar did claw back some of its losses on Thursday after President Donald Trump's administration announced plans to impose tariffs on EU steel and aluminium imports from several countries, raising the risk of a trade war and encouraging investors to seek safety in U.S.-denominated assets. Sterling has been hit particularly hard in the dollar's rally since mid-April, which coincided with signs of weakness in the UK economy and a sharp pullback in market forecasts for a Bank of England interest rate rise. Against the euro, the pound rose 0.1 percent on Thursday to 87.71 pence per euro. The two currencies have traded in a narrow band in recent weeks as both have come under selling pressure.
USD/CAD is supported at 1.2816 levels and is trading at 1.2961 levels. It has made session high at 1.2989 and lows at 1.2824 levels. The Canadian dollar weakened against its U.S. counterpart on Thursday, reversing from an earlier one-week low, after data showed weaker-than-expected growth in the domestic economy and as investors weighed the prospect of U.S. trade tariffs. The United States on Thursday said it will impose tariffs on aluminum and steel imports from Canada, Mexico and the European Union, reigniting investor fears of a global trade war as Washington's allies took steps to retaliate against U.S. goods. U.S. President Donald Trump announced the tariffs in March as part of an effort to protect U.S. industry and workers from what he described as unfair international competition, a key theme of his "America First" agenda. Canadian Foreign Minister Chrystia Freeland said Ottawa will impose retaliatory tariffs on C$16.6 billion worth of U.S. exports and challenge U.S. steel and aluminum tariffs under the North American Free Trade Agreement as well as at the World Trade Organization. An uncertain trade outlook has been one source of worry for the Bank of Canada. But chances of a Canadian interest rate hike as soon as July were boosted on Wednesday by a more hawkish than expected policy statement from the central bank .The Canadian dollar was last trading 0.7 percent lower at C$1.2961 to the greenback, or 77.15 U.S. cents. The currency's weakest level of the session was C$1.2978, while it touched its strongest intraday since May 23 at C$1.2819.
AUD/USD is supported around 0.7519 levels and currently trading at 0.7563 levels. It hit session high at 0.7591 and made session lows at 0.7552 levels. The Australian dollar bounced off key chart support dollar against on Thursday but stayed trapped in a narrow band, as global risk appetite improved amid signs of easing political turmoil in Italy. The Australian dollar hopped above a closely-watched 20-day moving average of $0.7526 to as high as $0.7588 in the early US session. It was last down 0.2 percent at $0.7563. The Aussie has found itself in a $0.7448-$0.7606 range in the past three weeks. Analysts see critical resistance around 76 U.S. cents. Global risk appetite got knocked earlier in the week after Italy's two anti-establishment parties scrapped plans to form a coalition. That raised the prospect of a general election, stoking fears such a vote will effectively be a referendum on the country's euro membership.A degree of calm, however, returned, with the two anti-establishment parties renewing efforts to form a government rather than force Italy into holding elections for the second time this year. Domestically, Australia released data on business investment which came in below expectations as manufacturers cut back on spending. Yet other sectors including miners splashed out more on plants and machinery in a positive sign for economic growth. The mixed numbers mean the Reserve Bank of Australia (RBA) will keep rates at a record low 1.50 percent for a while yet.
Equities Recap
European shares fell on Thursday as trade war concerns weighed and Deutsche Bank tumbled to a record low after a report the U.S. Fed last year deemed its U.S. operations as troubled.
The UK's benchmark FTSE 100 closed down by 0.02 percent, FTSEurofirst 300 ended the day down by 0.55 percent, Germany's Dax ended down by 1.23 percent, and France’s CAC finished the down by 0.37 percent.
U.S. stocks fell on Thursday after the United States moved to impose tariffs on metal imports from Canada, Mexico and the European Union, prompting retaliatory measures from some of its trading partners.
Dow Jones closed down by 1.01 percent, S&P 500 ended down 0.66 percent, Nasdaq finished the day down by 0.23 percent.
Treasuries Recap
U.S. Treasury yields on the long end of the curve fell on Thursday after the United States slapped tariffs on steel and aluminum imports from the European Union, Canada and Mexico, rekindling fears of a trade war.
In afternoon trading, U.S. 10-year yields fell to 2.831 percent, from Wednesday's 2.844 percent.
U.S. 30-year yields dropped to 2.992 percent, from 3.017 percent late on Wednesday.
On the short end of the curve, however, U.S. 2-year yields were up at 2.419 percent, from Wednesday's 2.411 percent.
Commodities Recap
Gold prices were flat on Thursday even though the U.S. dollar rally lost steam, as safe haven bids for bullion declined after political tensions in Italy eased, which also lifted the euro.
Spot gold was flat at $1,300.66 ounce by 2:07 p.m. EDT (1807 GMT). It was down nearly 1 percent for the month, headed for its second straight monthly decline.
U.S. gold futures for June delivery were also essentially flat, settling down just $1.40, or 0.1 percent, at $1,300.10 per ounce.
U.S. oil fell nearly 2 percent on Thursday, despite a larger-than-expected decline in U.S. crude inventories, while global benchmark Brent was little changed, pushing the spread between the two to its widest in more than three years.
Brent crude futures for August ended down 14 cents to $77.56 a barrel, while U.S. West Texas Intermediate July crude settled $1.17, or 1.7 percent, lower at $67.04 a barrel.
