Market Roundup
• US CPI +0.4% v 0.3% forecast, largest gain in 3-yrs, gas/rent rises, Core on target at 0.2%.
• US Apr real weekly earnings 0.2% vs revised 0.1% in Mar, building permits & housing starts rise.
• US Apr IP beats (0.7% v 0.3% forecast), MP on target (0.3%); Cap utilization beats.
• Fed’s Williams: Two or three rate hikes in 2016 makes sense, next few meeting very much live.
• Fed’s Lockhart: assumes 2-3 rate hikes possible this year, negative rates not in the cards in US.
• Fed’s Kaplan: After June or July rate hike will want to assess timing, pace of further hikes.
• Atlanta Fed’s GDPNow model f/c for real GDP growth in Q2 ’16 2.5%, down from 2.8% on May 13.
• ECB's Visco: Euro zone still faces risk of deflation.
• Japanese PM Abe to meet Yamaguchi; possibly to talk on sales tax.
• Fonterra's GDT Price Index climbed 2.6%, weekly/avg selling price of $2,283 per tonne, volume -12.1%.
• Brazil’s FinMin names Ilan Goldfajn as new central bank chief.
• Brazil’s Meirelles preparing constitutional amendment giving BCB autonomy to decide monetary policy
Looking Ahead - Economic Data (GMT)
• 01:30 China- China House Prices YY Apr 4.9%-previous
• 23:50 Japan GDP QQ Q1 forecast 0.1%, -0.3%- previous
• 23:50 Japan GDP QQ Annualized Q1 forecast 0.2%, -1.1% - previous
• 23:50 Japan GDP QQ Pvt Consumption Prelim Q1 forecast 0.2%, -0.9%- previous
• 23:50 Japan GDP QQ Capital Expend. Q1 forecast -0.8%, 1.5%- previous
• 23:50 Japan GDP QQ External Demand Q1 forecast 0.1%, 0.1%- previous
Looking Ahead - Events, Other Releases (GMT)
No Significant Events
Currencies Summary
EUR/USD is likely to find support at 1.1280 levels and currently trading at 1.1312 levels. The pair has made session high at 1.1347 and hit lows at 1.1301 levels. The U.S. dollar traded flat against the euro on Tuesday after traders doubted that strong April U.S. inflation data would push the Federal Reserve to raise interest rates soon, and on uncertainty ahead of a weekend Group of 7 meeting. The dollar initially spiked rose against the euro after data showed U.S. consumer prices recorded their biggest increase in more than three years in April as gasoline and rents rose, with the euro hitting a session low against the greenback of $1.1303. That move was short-lived, and the euro last traded mostly flat against the dollar at $1.1318 after traders grew skeptical the data would support a rate hike from the Fed anytime soon. The dollar index, which measures the greenback against a basket of six major rivals, was last down 0.05 percent at 94.522.
GBP/USD is supported in the range of 1.4429 currently trading at 1.4463 levels. It reached session high at 1.4496 and hit low at 1.4429 levels. The British pound gained sharply against the dollar on Tuesday as the pair reacted sharply to polls showing the In camp well ahead in the run-up to Britain's June 23 referendum on European Union membership. But gains were limited as it was slowed by a lower than expected monthly headline inflation, which added to the case for interest rates to stay on hold for the next year or more. Data from the Office for National Statistics showed consumer prices rose just 0.3 percent in April compared with a year ago, below forecasts for inflation to remain at 0.5 percent. It was the first time inflation slipped since September last year. Sterling touched a 5 day high against the dollar, drawing support from the latest poll from ORB for the Telegraph newspaper that showed the "In" camp holding a 15-point lead over its "Out" rivals.
USD/CAD is supported at 1.2767 levels and is trading at 1.2906 levels. It has made session high at 1.2956 and lows at 1.2872 levels. The Canadian dollar weakened against its U.S. counterpart on Tuesday as a wildfire threatened some oil sand facilities in Alberta, however some losses were tempered by higher crude prices and domestic manufacturing data that was less weak than expected. Canadian manufacturing sales slipped by 0.9 percent in March on weakness in the transportation equipment and primary metals industries, Statistics Canada said on Tuesday. The Canadian dollar has weakened from a 10-month high of C$1.2461 earlier this month, pressured by a bleaker outlook for the economy after a strong start to 2016. Last week it touched C$1.3016, its weakest in one month. The Canadian dollar was trading at C$1.2901 to the greenback, weaker than Monday's close of C$1.2896.
AUD/USD is supported around 0.7245 levels and currently trading at 0.7328 levels. It hit session high at 0.7356 and made session lows at 0.7316 levels. The Australian rose on Tuesday after minutes of the Reserve Bank of Australia's (RBA) May policy meeting encouraged markets to pare back the chances of a cut in interest rates. In minutes of the policy review, where the RBA reduced the cash rate by a quarter points to a record low 1.75 percent, it appeared less dovish than some had anticipated. The Australian dollar jumped to $0.7358, away from a 2-1/2-month trough of $0.7236 touched on Monday. Resistance was found at $0.7375, then more solidly at $0.7453, a major retracement level. Meanwhile, Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams both said on Tuesday that they expect two or three increases to U.S. interest rates this year. The U.S. central bank has held rates at a target range of 0.25 to 0.50 percent since moving from near zero in December.
Equities Recap
European shares steadied on Tuesday with gains in companies such as Taylor Wimpey and Vodafone following encouraging updates and a rally in mining companies offset by a weaker auto sector.
Britain's blue-chip FTSE 100 index closed up by 0.15 percent, France's benchmark CAC-40 index closed down by 0.54 percent, Germany's DAX ended down 0.79 percent, meanwhile the pan-European Eurofirst 300 index was down by 0.14 percent.
Wall Street sold off on Tuesday as investors boosted their bets on the Federal Reserve raising rates later this year, while Home Depot dragged on indexes following its quarterly report.
Dow Jones closed down by 1.03 percent, S&P 500 ended down by 0.95 percent, Nasdaq finished the day down by 1.26 percent.
Treasuries Recap
Short-dated U.S. Treasury yields rose to nearly three-week highs on Tuesday after data showed the nation's consumer prices at their strongest in more than three years, pushing traders to price in a greater chance that the Federal Reserve could raise interest rates.
Two-year Treasury notes rose nearly four basis points from late Monday to 0.823 percent.
Benchmark 10-year notes fell 2/32 in price to yield 1.760 percent, little changed from late Monday.
Thirty-year bonds rose 8/32 in price to yield 2.588 percent.
Commodities Recap
Gold prices rose on Tuesday, reversing earlier losses after a weaker dollar and falling stock markets spurred safe-haven buying of the precious metal.
Spot gold was up 0.3 percent at $1,277 per ounce by 2:58 p.m. EDT (1858 GMT), while U.S. gold futures settled up 0.2 percent at $1,276.9.
Oil prices rose for a second straight day on Tuesday, with U.S. futures hitting seven-month highs, on expectations of a drawdown in U.S. crude stockpiles and a new wildfire threat on Canadian oil supplies.
WTI's finished up 59 cents, or 1 percent, at $48.31 a barrel. The session high was $48.42 while the post-settlement peak was $48.56.
Brent crude closed up 31 cents at $49.28, hitting a six-month high of $49.58 earlier.
