Market Roundup
• US Apr Import Prices MM, 0.3%, 0.5% forecast, 0.0% previous.
• US Apr Export Prices MM, 0.6%, 0.3% forecast, 0.3% previous.
• US May U Mich Sentiment Prelim, 98.8, 98.5 forecast, 98.8 previous.
• US May U Mich Conditions Prelim, 113.3, 115.7 forecast, 114.9 previous.
• US May U Mich Expectations Prelim, 89.5, 88.0 forecast, 88.4 previous.
• US May U Mich 1 Yr Inf Prelim, 2.8%, 2.7% previous.
• US May U Mich 5-yr Inf Prelim, 2.5%, 2.5% previous.
• US w/e ECRI Weekly Index, 149.3, 150 previous.
• US w/e ECRI Weekly Annualized, 4.5%, 4.1% previous.
• CA Apr Employment Change, -1.1k, 17.4k forecast, 32.3k previous.
• CA Apr Unemployment Change, 5.8%, 5.8% forecast, 5.8% previous.
• CA Apr Participation Rate, 65.40%, 65.50% previous.
• St. Louis Fed's Bullard says rates already near neutral, no more raises needed.
• AT&T CEO: We made 'big mistake' hiring Cohen, chief lobbyist out .
• Negotiators fail to reach NAFTA deal, say talks to resume.
• Europe moves to safeguard interests in Iran after U.S. pullout.
Looking Ahead - Economic Data (GMT)
• 13 May 23:50 Japan Apr Corp Goods Price MM, 0.1% forecast, -0.1% previous
• 13 May 23:50 Japan Apr Corp Goods Price YY, 2.0% forecast, 2.1% previous
Looking Ahead - Events, Other Releases (GMT)
• N/A ECB policymaker Francois Villeroy de Galhau speaks in Paris, France
• 06:45 Federal Reserve Bank of Cleveland President Loretta Mester speaks in Paris
• 10:15 Norway Central Bank chief Oystein Olsen speaks in Oslo
• 11:45 ECB Chief Economist Peter Praet in a lunchtime MNI Connect Roundtable in London
• 13:40 Federal Reserve Bank of St. Louis President James Bullard gives presentation before CoinDesk's Consensus 2018 in New York
• 15:00 ECB Board member Sabine Lautenschlager speals in Copenhagen
• 17:45 ECB Executive Board Member Benoit Coeure speaks in Geneva
• 20:20 Kevin Stiroh, executive vice president of the Federal Reserve Bank of New York, speaks in Toronto
Currency Summaries
EUR/USD is likely to find support at 1.1906 levels and currently trading at 1.1943 levels. The pair has made session high at 1.1967 and hit lows at 1.1934 levels. The euro strengthened for a second day against the greenback on Friday as traders booked gains on its recent run-up tied to the widening interest rate gaps in favor of the United States and signs of cooling growth in the rest of the world. A loss of economic momentum in Europe has made policymakers in Europe and Britain more cautious about ending 2008 financial crisis-era policies. On Friday, ECB President Mario Draghi said the euro zone needs a new "fiscal instrument" to help weaker member nations if they are being overly penalized by investors during a debt crisis. Traders pushed out expectations of a U.K. rate hike to end-2018 and the European Central Bank boosting interest rates in the second half of 2019.U.S. interest rates futures implied traders expect the U.S. Federal Reserve to raise key borrowing costs at least twice more in 2018. The euro scored a 0.2 percent gain at $1.1935 against the greenback. On the week, the common currency was set to fall 0.15 percent against the greenback and to eke out about a 0.08 percent gain versus the yen. An index that tracks the dollar versus six currencies rose initially before selling re-emerged. It was down 0.15 percent at 92.603, below its strongest level of the year at 93.416 on Wednesday.
GBP/USD is supported in the range of 1.3454 levels and currently trading at 1.3540 levels. It reached session high at 1.3589 and dropped to session low at 1.34529 levels. The British pound strengthened against the greenback on Friday as a weak dollar helped the pound recover losses suffered when the Bank of England held rates and cut its economic growth projections. The BoE held interest rates steady as expected on Thursday but cut its growth and inflation projections for this year and next. The decision saw sterling fall close to a four-month low against the dollar and left traders skeptical about whether the central bank will hike rates at all this year. Markets a month ago had foreseen a 90 percent chance of a May rate hike but those expectation were dashed by weaker-than-expected data. The pound had rallied in 2018 on the back of optimism that Britain could secure itself a transition deal for when it leaves the European Union next year. But bad weather earlier in the year, which hurt economic momentum, and a bounce in the dollar have reversed sterling's run higher. The British currency tumbled to $1.35 in recent weeks from its post-Brexit vote highs of close to $1.44. The pound was last up 0.3 percent at $1.3554 and had increased 0.1 percent against the euro to 88.11 pence. Friday's rise leaves the pound on track for a small weekly rise after three consecutive weeks of falling.
USD/CAD is supported at 1.2700 levels and is trading at 1.2787 levels. It has made session high at 1.2798 and lows at 1.2727 levels. The Canadian dollar was little changed against its U.S. counterpart on Friday, with the currency pulling back from an earlier three-week high after domestic jobs data tempered expectations for a Bank of Canada interest rate hike this month. Chances of a Bank of Canada interest rate hike at the May 30 announcement slipped to 39 percent from nearly 50 percent before the jobs data, the overnight index swaps market indicated. On the data front, Canadian economy unexpectedly shed jobs in April on the back of a drop in part-time positions, bolstering bets that the Bank of Canada will hold interest rates steady when its policymakers meet later this month. The decline of 1,100 jobs reported by Statistics Canada on Friday was well short of economists' forecasts for an increase of 17,400. The unemployment rate was unchanged at 5.8 percent, as expected. The price of oil, one of Canada's major exports, steadied near 3-1/2 year highs as the prospect of new U.S. sanctions on Iran tightened the outlook for Middle East supply. The Canadian dollar was trading nearly unchanged at C$1.2786 to the greenback. The currency touched its strongest since April 20 at C$1.2727.
USD/JPY is supported around 108.82 levels and currently trading at 109.31 levels. It peaked to hit session high at 109.41 and made session lows at 109.12 levels. The U.S. dollar was little changed against the Japanese yen on Friday as investors were cautious on potential broadening of conflict in the Middle East. Israel said it attacked nearly Iran’s entire military infrastructure in Syria on Thursday, after Iranian forces fired rockets at Israeli-held territory for the first time in the most extensive military exchange ever between the two adversaries. It was the heaviest Israeli barrage in Syria since the 2011 start of the civil war in which Iranians, allied Shi'ite Muslim militias and Russian troops have deployed in support of President Bashar al-Assad. The confrontation came two days after the United States announced its withdrawal, with Israel's urging, from a nuclear accord with Iran. The dollar fell for a third day on Friday against a basket of currencies. While the 10-year U.S. Treasury yield rose slightly, it remained below 3 percent. Trader expectations that the Fed will raise rates in June are 100 percent, according to CME Group's FedWatch Tool. For a rate hike in September, the current probability is 73.6 percent, while the market remains divided over whether the Fed will make a fourth rate hike at the December meeting.
Equities Recap
European stocks achieved their longest weekly winning streak for more than three years on Friday as M&A activity added to an advance on the back of a busy earnings season.
UK's benchmark FTSE 100 closed up by 0.33 percent, the pan-European FTSEurofirst 300 ended the day up by 0.09 percent,Germany's Dax ended down by 0.16 percent, France’s CAC finished the day down by 0.1 percent.
The S&P 500 inched higher on Friday, helped along by healthcare stocks after U.S.
President Donald Trump gave a speech blasting high drug prices but avoided taking aggressive measures to cut them.
Dow Jones closed up by 0.37 percent, S&P 500 ended up by 0.17 percent, Nasdaq finished the day down by 0.04 percent.
Treasuries Recap
The Treasury yield curve on Friday was the flattest it had been since July 2007 as shorter-dated yields rose on expectations the Federal Reserve would hike U.S. interest rates in spite of weaker-than-expected economic data this week.
The spread between the five-year and 30-year bond yields reached a session low of 26.2 basis points, its narrowest since before the financial crisis in 2007.
The 10-year yield on Friday rose to a session high of 2.995 percent, still below the 3 percent level it broke above on Wednesday.
The two-year yield hit a weekly high of 2.543 percent on both Thursday and Friday.
Commodities Recap
Gold was flat on Friday, headed for its first weekly gain in four weeks, as the dollar weakened and investors grew a bit less confident about prospects that the Federal Reserve would raise interest rates three more times in 2018.
Spot gold was unchanged at $1,321 per ounce by 1:43 p.m. EDT (1743 GMT). During the session it touched its highest since April 25 at $1,325.96, nudging its 100-day moving average of $1,326. It was up 0.5 percent for the week so far.U.S. gold futures for June delivery settled down $1.60, or 0.1 percent, at $1,320.70 per ounce.
Crude prices fell in a see-saw session on Friday, retreating after early gains as it looked likely that U.S. allies would push to maintain a deal with Iran, which could keep that country's crude exports on global markets.
Brent crude settled down 35 cents at $77.12 a barrel, just below the $78-level hit on Thursday, its highest since November 2014. The benchmark contract remained lower in post-settlement trade.
U.S. light crude was down 66 cents at $70.70, off a 3-1/2 year high of $71.89 it hit on Thursday.
