Market Roundup
- St Louis Fed Bullard – Fed to remain data dependent, June rate hike not set in stone, no need for press conference per se after move, suggest July meeting live – CNBC.
- Greece reaches debt relief breakthrough with creditors – Financial Times.
- US Tsy Sheets – Eyes China CNY reform progress ahead of June dialogue - MNI.
- Australia Q1 construction work done -2.6% q/q, -1.5% eyed.
- New Zealand April trade surplus NZ$292 mln, NZ$60 mln eyed, annual balance NZ$3.658 bln deficit, NZ$3.94 bln eyed, Apr imports NZ$4.01 bln, exports NZ$4.3 bln.
Economic Data Ahead
- (0400 ET/0800 GMT) Germany May Ifo business climate index, 106.8 eyed; last 106.6.
- (0400 ET/0800 GMT) Germany May Ifo current conditions index, 113.2 eyed; last 113.2.
- (0400 ET/0800 GMT) Germany May Ifo expectations index, 100.8 eyed; last 100.4.
- (0500 ET/0900 GMT) Italy Apr trade balance – non-EU – flash; last E4.04 bln surplus.
- (0500 ET/0900 GMT) Italy Mar industrial orders/sales; last +0.7% m/m, +3.8% y/y, +0.1%, -0.2%.
- (0500 ET/0900 GMT) Switzerland May ZEW investor sentiment index; last 11.5.
- (0730 ET/1130 GMT) United States Apr building permits – rev; prelim 1.12 mln AR, +3.6% m/m.
- (0830 ET/1230 GMT) United States Apr goods trade balance – advance, $56.9 bln deficit.
- (0900 ET/1300 GMT) United States Mar FHFA house price index; last +0.4% m/m, +5.6% y/y, index 231.4.
- (0900 ET/1300 GMT) Belgium May leading indicator, -2.6 eyed; last -2.4.
- (0945 ET/1345 GMT) United States May Markit services/comp PMIs – flash, services 54 eyed; last 52.8.
Key Events Ahead
- N/A EcoFin meeting in Brussels.
- N/A Madrid IIF Spring meeting, various ECB speakers (till tomorrow).
- N/A Norway NOK3 bln 1.75% 2025 NST477 government bond auction.
- (0530 ET/0930 GMT) Germany E1 bln 2.5% 2044 Bund auction.
- (0630 ET/1030 GMT) ECB VP Constancio speaks at London BoE/FESSUD workshop.
- (0730 ET/1100 GMT) Sweden SEK1 and 3 bln 3.5% and 1.0% 2022 and 2026 govt bond auctions.
- (0900 ET/1300 GMT) Philly Fed Harker speaks at Philadelphia forum.
- (0915 ET/1315 GMT) UK Tsy Hands speaks in London on Brexit impact.
- (1000 ET/1400 GMT) BoC policy announcement, no change in 0.5% overnight rate eyed.
- (1140 ET/1540 GMT) Minny Fed Kashkari speaks at Bismarck, No Dakota conference.
- (1300 ET/1700 GMT) Dallas Fed Kaplan in Houston panel discussion.
FX Beat
USD: The dollar index, against a basket of currencies, stood at 95.52, climbing to an early 2-month high of 95.661 after upbeat U.S. housing data supported the prospects for Federal Reserve interest rate hike in the near term.
EUR/USD: The euro edged up 0.1 percent to 1.1151, however, within reach of 1.1132, its lowest level since March 18 touched on Tuesday when it declined 0.7 percent. It has lost more than 4 percent since it struck an 8-month high of 1.1616 in early May. The greenback was supported by robust U.S. housing data and comments from various Federal Reserve officials emphasizing the chances of a rate hike in June or July. The positive housing figures backed the Fed's April policy meeting minutes, released last week, which suggested that the central bank may raise rates soon if the economy appeared strong enough. Markets will closely watch European Central Bank Vice-President Vítor Constâncio speech and U.S. economic data for further momentum on the pair. Immediate resistance is located at 1.1186 (5-DMA), break above will take the pair over the 1.1200 level. On the downside, support is seen at 1.1132 (Previous Session Low).
USD/JPY: The Japanese yen edged down as the greenback extend gains over the 110 level. The major trades at 110.06, having touched an early high of 110.18, pulling closer to a 3-week peak of 110.58, scaled last week. The pair had retreated sharply and touched an early low of 109.86 after the BoJ's Kuroda stated issue over exiting BOJ’s easy monetary policy and suggested rolling back the ongoing accommodative monetary policy regime. Markets continue to absorb comments from the BoJ Chief ahead of U.S. economic data. Immediate support is located at 109.69 (May 19 Low), break below could target 109.51. On the higher side, resistance is seen at 110.58 (May-20 High).
GBP/USD: Sterling declined after advancing to a 5-day high of 1.4641 on Tuesday, when it gained more than 1 percent. The major rose overnight, after a U.K. poll showed a 13-point lead in support among Britons to stay in the European Union over the "Out" campaign. Sterling trades 0.1 lower at 1.4613, hovering towards sessions low of 1.4602, however, still within the sight of 1.4641 peak. Immediate support is located at 1.4567 (5-DMA), break below could target 1.4523. On the higher side, resistance is seen at 1.4663 (may 19 High). Against the euro, the pound trades 0.2 percent lower at 0.7629.
AUD/USD: The Australian dollar made a minor recovery after declining to a 12-week low of 0.7145 on Tuesday, weighed down by expectations of a rate cut by the Reserve Bank of Australia. The Aussie trades 0.3 percent higher at 0.7208, pulling back from previous session lows. The major was strengthened by persisting risk-on market profile as the Asian equities and oil prices rebounded higher, however the gains were capped as Australia’s construction output declined -2.6 percent against market consensus of -1.5 and previous -2.9, adding to further RBA rate cut expectations. Immediate resistance is seen at 0.7228 (Previous Session High), break above could take the pair to 0.7259. On the downside, support is located at 0.7173 (Session Low).
NZD/USD: The New Zealand dollar edged up after the economy posted a higher than expected trade surplus. The kiwi rose 0.2 percent to 0.6752, having touched sessions high of 0.6763 and away from a low of 0.6705 struck on Tuesday. New Zealand's trade balance for the month of April was at $292 million against market forecast $60 million and previous $117 million. Markets attention will remain on U.S. economic data, with New Zealand’s economic calendar absolutely data empty. Immediate resistance is seen at 0.6763 (Session High), break above could take the pair to 0.6781. On the lower side, support is located at 0.6716 (May-10 Low).
Equities Recap
Asian shares advanced, following sharp gains in European and U.S. markets, as the dollar firmed after upbeat U.S. home sales supported the view that the economy may be strong enough for the Fed to hike interest rates in near term.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.6percent. Shanghai Composite climbed 0.3 percent, while CSI 300 index advanced 0.4 percent.
Hong Kong's Hang Seng index gained 2.3 percent. Taiwan stocks added 1.2 pct at 8,396.20 points.
Australia's S&P/ASX 200 index advanced 1.58 pct at 5,379.00 points, Tokyo's Nikkei gained 1.57 pct at 16,757.35 and Seoul shares rose 1.16 pct.
Commodities Recap
Oil futures rose, hovering towards $50 a barrel mark, with U.S. crude hitting its highest in over 7-months after industry data suggested a larger-than-expected decline in U.S. crude inventories last week. Brent futures trade 0.1 percent higher at $49.19 a barrel by 0619 GMT, having closed up 26 cents to halt a four-day slide. U.S. crude futures had advanced 62 cents to $49.24 a barrel, after ending the previous session up 54 cents.
Gold declined to a 7-week low as expectations of an early interest rate hike by the U.S. Federal Reserve strengthened the dollar to a near 2-month high. Spot gold was at $1,224.54 per ounce by 0620 GMT, it’s the lowest since April 7. U.S. gold futures dipped 0.2 percent to $1,226.80.
Treasuries Recap
The 10-year U.S. treasury yield stood at 1.865 percent versus previous close of 1.859 percent.
Australian government bond futures declined in a bearish steepening of the curve, with the 3-year bond contract off 2 ticks at 98.380. The 10-year contract eased 4 ticks to 97.6850, while the 20-year contract shed 3.5 ticks to 97.0550.
New Zealand government bonds eased, pushing yields 0.5 bps points higher at the short end and 1.5 bps higher at the long end.
Canadian government bond prices were slightly lower across the maturity curve, with the benchmark 10-year falling 14 Canadian cents to yield 1.364 percent, while the 2-year price down 0.5 Canadian cent to yield 0.628 percent. The Canada-U.S. 2-year bond spread was 1 basis point more negative at -28.6 basis points, its largest gap since March 28, as Canadian government bonds outperformed.
