Market Roundup
• UK PM May: Wants to hold an early election on June 8.
• UK opposition Labour Party will back PM May’s call for early election – BBC Political Editor on Twitter.
• UK Finance Minister Hammond: Notes that PM May’s statement has boosted sterling, demonstrates market confidence in a future conservative govt.
• Support for Britain’s ruling conservatives at 46%, Labour 25%, Liberal Dems 11%, UKIP 8%- IC poll released on Twitter after snap election announced.
• US March Building Permits 1.26m vs. forecast 1.25m and prior 1.216m.
• US March Housing Starts 1.215m vs. forecast 1.25m and prior 1.303m (rev from 1.288m).
• US March Industrial Output 0.5% vs. forecast 0.5% and prior 0.1%.
• US March Capacity Utilization 76.1% vs. forecast 76.2% and prior 75.7% (rev from 75.9%).
• Fed’s George: Likely some tradeoff between shrinking portfolio, rate hikes; US economy on solid footing; risks to upside.
• Fed’s George: US fiscal policy a potential upside risk that pushes inflation higher; Not incorporating fiscal stimulus into economic forecasts.
• Global Dairy Trade Price Index +3.1%, Avg. selling price of $3,139 per ton, WMP +3.5% @ $2,998 per ton – Global Dairy Trade.
• Brazil’s Lawmaker in charge of drafting pension reform, Arthur Maia, says reform draft conciliates gov’t goals with society demands.
Looking Ahead - Economic Data (GMT)
• 01:30 New Zealand March New Motor Vehicle Sales no forecast prior -2.7%
Looking Ahead - Events, Other Releases (GMT)
• No major events scheduled
Currency Summaries
EUR/USD is likely to find support at 1.0636 levels and currently trading at 1.0733 levels. The pair has made session high at 1.0735 and hit lows at 1.0681 levels. The dollar declined sharply against euro on Tuesday as greenback weakened on disappointing U.S. housing starts data and nerves over trade talks between the United States and Japan. Investors are watching ongoing U.S.-Japan economic talks for signs of the direction U.S. trade policy could take under President Donald Trump, who campaigned on a protectionist platform and has complained of countries artificially weakening their currencies. U.S. homebuilding fell in March after unseasonably mild weather buoyed activity in February and manufacturing output dropped for the first time in seven months, further indications that economic growth braked sharply in the first quarter. Housing starts decreased 6.8 percent to a seasonally adjusted annual rate of 1.22 million units as the construction of single-family homes in the Midwest recorded its biggest decline in three years, the Commerce Department said. Economists had forecast homebuilding falling to a 1.25 million-unit pace last month. Housing starts were up 9.2 percent compared to March 2016.The euro was 0.6 percent higher at $1.0730, having moved little on Monday, when many European markets were shut for the Easter holiday.
GBP/USD is supported in the range of 1.2708 levels and currently trading at 1.2843 levels. It reached session high at 1.2904 and dropped to session low at 1.2514 levels. Sterling rose sharply against the dollar on Tuesday to hit its highest levels in four months, after British Prime Minister Theresa May surprised markets by calling for an early parliamentary election in June. Standing outside her Downing Street office, May said she had decided "with reluctance" that an election was needed to secure political unity and stability as Britain negotiates its way out of the European Union. Sterling jumped as high as $1.2902, its strongest since Dec. 14, as investors viewed the election as lessening political uncertainty and making it more likely that Britain could maintain some kind of preferential access to the single European market. The pound also climbed over 1 percent to a four-month high of 83.79 pence per euro. Its gains against the dollar put sterling on track for its biggest one-day rise since January, and prompted finance minister Philip Hammond to say in parliament in a rare comment on the currency that its rise showed markets were confident the Conservative government would win an increased majority.
USD/CAD is supported at 1.3348 levels and is trading at 1.3389 levels. It has made session high at 1.3399 and lows at 1.3350 levels. The Canadian dollar lost ground against its U.S. counterpart on Tuesday as oil fell and a snap British election added to geopolitical jitters from North Korea to France. That weakness for loonie came even as a steeper-than-expected decline in U.S. home construction kept the U.S. dollar down against a basket of currencies. French voters will go to the polls on Sunday in a first round that appears to be a tight four-way race led by a centrist and a far-right candidate. Investors are also nervous about tensions over North Korea, which failed to launch a ballistic missile over the weekend. Oil prices were weighed by concerns that U.S. production growth is undermining efforts to cut oversupply after a U.S. government report said shale oil output in May was expected to post the biggest monthly increase in more than two years. the Canadian dollar was last trading at C$1.3388 to the greenback, or 74.79 U.S. cents, weaker than the Bank of Canada's official close on Monday of C$1.3316, or 75.09 U.S. cents.
AUD/USD is supported around 0.7520 levels and currently trading at 0.7554 levels. It hit session high at 0.7558 and made session lows at 0.7534 levels. Australian dollar declined against US dollar on Tuesday as the Australian dollar was weighted down by drop iron ore prices and minutes of the central bank's April meeting reinforced views interest rates would stay low for longer. RBA Governor Philip Lowe has repeatedly argued that cutting rates further would only encourage more borrowing by households who are already heavily indebted, outweighing any economic benefits. Minutes of the Reserve Bank of Australia's (RBA) April meeting showed policymakers had to balance a subdued labour market against escalating household debt when leaving rates steady at 1.50 percent. The RBA inserted a new line saying developments in the labour and housing markets "warranted careful monitoring" over coming months. Tumbling prices for iron ore, Australia's No.1 export earner, also added to the pressure. The most-traded iron ore on the Dalian Commodity Exchange has fallen to its lowest since early January. The Australian dollar fell 0.4 percent to $0.7556, but stayed above a 3-month trough of $0.7473 touched last week.
Equities Recap
European shares hit three-week lows on Tuesday in volatile trade after Britain's prime minister called for an early election and the first round of France's presidential election loomed.
The UK's benchmark FTSE 100 closed down by 2.3 percent, FTSEurofirst 300 ended the day up by 1.03 percent, Germany's Dax ended down 0.7, and France’s CAC finished the day down by 1.4 percent.
U.S. stocks declined on Tuesday, weighed down by a drop in Goldman Sachs and Johnson & Johnson in the wake of their quarterly results, while geopolitical tensions continued to fuel investor caution.
Dow Jones closed down by 0.56 percent, S&P 500 ended up 0.30 percent, Nasdaq finished the day down by 0.14 percent.
Treasuries Recap
U.S. Treasury yields fell to five-month lows on Tuesday as nervousness ahead of France’s first round of presidential elections this weekend and ongoing geopolitical tensions increased demand for safe-haven U.S. debt.
U.S. benchmark 10-year Treasury note yields fell as low as 2.177 percent, the lowest since Nov. 14, and down from 2.252 percent on Monday. The yields have tumbled from 2.629 percent on March 14.
Commodities Recap
Gold turned higher on Tuesday, nearing the prior session's five-month peak, bolstered by a softer dollar, lower U.S. Treasury yields, North Korea tensions and nervousness ahead of the French presidential election.
Spot gold turned up 0.6 percent to $1,291.98 an ounce by 3:12 p.m. EDT (1912 GMT), just below the prior session's peak at $1,295.42, its highest since Nov. 9. U.S. gold futures settled up 0.2 percent at $1,294.10.
Oil prices fell on Tuesday, touching their lowest in 11 days as bearish positions were fueled by a U.S. government report which said shale oil output in May was expected to post the biggest monthly increase in more than two years.
Global benchmark Brent crude futures settled down 47 cents at $54.89 a barrel. Brent was down 28 cents, trading at $55.08 a barrel by 3:24 p.m. EDT. Brent touched $54.61 intraday, its lowest since April 7.
U.S. WTI futures fell 24 cents, settling at $52.41 a barrel. Their intraday low was $52.10, also the weakest since April 7.
