Market Roundup
- Japan LDP lawmakers to propose PM proceed with sales tax hike, additional budget - Reuters.
- Japan FY ’15 wage growth slows, real wages dip, March revised up – MNI.
- US TsySec Lew urges flexibility on Greek debt talks – Reuters.
- Foreign CB US debt holdings +$254 mln to $3.219 trln week-ended May 18, Treasuries -$1.736 bln to $2.904 trln, agencies +$1.959 bln to $266.687 bln.
- NY Fed – Swaps with foreign CBs $1.006 bln May 18 week, BoJ $1 mln, ECB rest.
- Lipper – Investors pull $3.9 bln from US-based stock funds latest week.
- Canada PM Trudeau wants Britain to stay in EU – Reuters.
- ECB Coeure – No plan to cut depo rate, credit easing to have more impact than negative rates – Reuters, MNI.
- RBA Edwards – Plans to balance Australia federal budget @’21 implausible, nation risks losing prized AAA-credit rating – Wall St Journal.
- New Zealand April net migration gain, short-term visitors +7.9% y/y.
Economic Data Ahead
- (0400 ET/0800 GMT) Eurozone Mar current account bal; last E19.0 bln sa, E11.1 bln nsa surpluses.
- (0400 ET/0800 GMT) Eurozone Mar net investment flow; last E121.6 bln inflow.
- (0600 ET/1000 GMT) Great Britain May CBI industrial trends survey – order books, -13 forecast; last -11.
- (0900 ET/1300 GMT) Belgium May consumer confidence index; last -8.0.
- (1000 ET/1400 GMT) United States Apr exist home sales, 5.4 mln AR, +1.3% m/m forecast; last 5.4 mln, +5.1%.
Key Events Ahead
- N/A G7 FinMin/central bankers meeting in Sendai (till tomorrow).
- N/A Riksbank DepGov Jansson in Kiev panel discussion.
- (0300 ET/0700 GMT) ECB-Estonia/Slovak/Lithuania CB governors speak at Slovenia meeting.
- (0600 ET/1000 GMT) UK DMO GBP0.5/1.0/2.5 bln 1/3/6-month treasury bill auctions.
- (0900 ET/1300 GMT) Fed Gov Tarullo speaks at Washington, DC insurance forum.
- (1100 ET/1500 GMT) BoE MPC Forbes, external MPC release economic paper.
FX Beat
USD: The dollar index, against a basket of currencies, was steady at 95.295, after going as high as 95.502 overnight, its highest since March 29. The index is poised a weekly gain of 0.7 percent.
EUR/USD: The euro hovers around 1.1209, nursing its drop to a more than 7-week low of 1.1179 overnight. The major weakened after New York Fed's William Dudley, stated that the U.S. economy could be strong enough to warrant a rate increase in June or July. It was down 0.9 percent for the week. According to the CME FedWatch tool, markets now price in a 32 percent chance of a rate hike in June, up from 15 percent on Tuesday. Traders will closely watch eurozone's current account figures and U.S. existing home sales data for further momentum on the pair. Immediate support is seen at 1.1179 (Previous Session Low), while resistance is located at 1.1250 (5-DMA).
USD/JPY: The Japanese yen nursed losses as the greenback once again rose above the 110.00 mark and up 1.2 percent for the week. The dollar trades 0.1 percent higher at 110.21 yen, hovering towards an early high of 110.24. It hit 110.38 overnight, its highest since April 28, before the sell-off in equities led investors towards the safe-haven Japanese currency. The major will continue to track the broader markets sentiment amid developments from the G7 gathering, ahead of U.S. existing home sales data and FOMC member Tarullo’s speech. Immediate resistance is located at 110.38 (Previous Session High), while on the lower side, support is seen at 109.67 (5-DMA).
GBP/USD: Sterling eased after hitting a 2-week high of $1.4662. Its rose to a 3 1/2-month of 87.9, its highest since Feb. 5 against a trade-weighted basket of currencies. The major was strengthened by a robust April retail sales report, which reduced chances of an interest rate cut that some investors are speculate on. Sterling edged down to 1.4606, however, within the sight of 1.4662 struck in the previous session. Immediate resistance is seen at 1.4576 (Apr -29 Low), break below could drag the pair to 1.4561. On the higher side, resistance is located at 1.4638 (Apr-26 High). Against the euro, the pound was at 76.75, pulling away from a high of 76.49, hit on Thursday.
AUD/USD: The Australian dollar steadied around 0.7226, having declined to 0.7176 on Thursday, a level touched since early March. The Aussie has dropped 0.5 percent this week and if sustained, it would be the fifth consecutive weekly loss. The pair slumped, largely on speculation that the U.S. Federal Reserve could raise rates as early as June. Looking ahead, with the Australian economic calendar absolutely data-empty, markets attention will remain on U.S. home sales and the Baker Hughes rig count for further cues. The pair faces resistance at 0.7259 (5-DMA), while support is located at 0.7200 level, break below could drag the pair near 0.7176 (Previous Session Low).
NZD/USD: The New Zealand dollar rose 0.2 percent to trade at 0.6757, pulling away from a 8-week low of 0.6710 hit in the previous session. The kiwi touched an early high of 0.6776, however, still poised for a weekly loss of 0.1 percent. The major was strengthened on strong migration and tourism numbers. Immediate resistance is located at 0.6776 (Session High), while on the downside, support is seen at 0.6728 and break below could drag the pair to 0.6716/0.6710.
Equities Recap
Asian shares rose, however were on course for a weekly loss, while the dollar was poised for weekly gains on expectations that the Federal Reserve could raise rates as early as next month.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.6 percent, though still down 0.3 percent for the week.
Shanghai Composite and CSI 300 both indices rose 0.1 percent, on track for weekly gains of 0.7 percent and 0.3 percent, respectively.
Hong Kong's Hang Seng added 0.9 percent, on track for a rise of 0.5 percent for the week. Taiwan stocks closed up 0.4 pct at 8,131.26 points.
Australia's S&P/ASX 200 index gained 0.67 pct at 5,359.20 points, Tokyo's Nikkei rose 0.54 pct at 16,736.35 and Seoul shares edged up 0.05 pct.
Commodities Recap
Oil prices rose as turmoil in Nigeria, crisis in Venezuela and shale bankruptcies in the United States all added up to tightening supplies. International Brent crude futures were trading at $49.15 per barrel at 0606 GMT, while U.S. West Texas Intermediate crude futures was up 39 cents, or 0.81 percent, at $48.55 a barrel.
Gold steadied after two days of losses, however was set for its biggest weekly decline in 8-weeks on the back of a strong dollar. Spot gold was at $1,254.12 per ounce by 0607 GMT, after declining for two days in a row. It hit a 3-week low of $1,243.74 in the previous session. U.S. gold futures were up 0.2 percent to $1,257.40 early on Friday but headed for a 1.2-percent weekly drop.
Treasuries Recap
The 10-year U.S. treasury yield stood at 1.8382 down by 0.007 bps.
Australian government bond futures bounced from lows, with the 3-year bond contract up 2 ticks at 98.400. The 10-year contract rose 5 ticks to 97.7050 in a bullish flattening of the curve.
The 20-year contract added 5 ticks to 97.0650. The premium between Australian and U.S. 2-year cash bond yields dropped to its lowest in 15 years to 71 basis points on Thursday, before edging up to 74 basis points. The gap was 130 basis points mid-April.
New Zealand government bonds were mostly steady.
Canadian government bond prices were higher across the maturity curve, with the benchmark 10-year rising 23 Canadian cents to yield 1.344 percent and the 2-year price up 3 Canadian cents to yield 0.624 percent.
