Market Roundup
- EUR/USD -0.35%, USD/JPY +0.2%, GBP/USD -0.15%, AUD/USD -0.52%.
- DXY +0.2%, DAX -0.05%, FTSE -0.05%, Brent -0.15%, Iron ore +0.2%.
- AUD/USD hit 2-wee the low at 0.7490 in early Europe.
- EUR/USD pulls back from 5-1/2 month high. 1.0951-1.0903.
- Oil price slips on bulging U.S. crude stocks, ample global supplies.
- France Apr Consumer Confidence 100 vs previous 100. 100.
- Swiss Apr Investor Sentiment 22.2 vs previous 29.6.
- Swedish Apr Consumer Confidence 103.4pts vs previous 102.6.
- Swedish inflation expectations one year ahead fell to 2.4%.
- EU tightens Brexit demands on residence, banks –document.
- Higher exports to lift German growth, investments -econ ministry.
- European Commission President Jean-Claude Juncker and the EU’s ‘Brexit’ negotiator Michel Barnier will pay a ‘flying visit’ to PM Theresa May in London today. Media reports suggest that it will be a private meeting focusing on the process of Brexit talks.
- This weekend’s special summit of EU-27 leaders (excluding the UK) will formally approve negotiating guidelines unveiled in response to the triggering of Article 50. Formal negotiations are expected to start after the UK’s general election on 8th June.
Economic Data Week Ahead
- (0830 ET/1230 GMT) U.S. advanced GDP Q/Q seems to have slowed in the Q1; the data from the Commerce Department is expected to show on Friday. Gross domestic product is likely to have dropped to 1.3 pct from 2.1 pct in the previous quarter.
- (1000 ET/1400 GMT) The Conference Board's Consumer Confidence Index is expected to have dropped in April, a month after it hit its highest since December 2000.
- Canadian GDP data is due to be released on Friday; a report that is likely to display the economy grew by 0.1 pct in February. While that will mark a step down from January's strong 0.6 pct pace, analysts still expect the economy is on track for a solid first quarter. On Wednesday, a report is expected to show retail sales stalled in February after a surprisingly strong January.
- The UK Q1 GDP data is scheduled to be announced on Friday that is likely to print at 0.4 pct, a shrink of a tad below from previous 0.6 pct.
- ECB monetary policy meeting for minimum bid rate and asset purchasing programme is scheduled on Thursday.
- The Bank of Japan is expected to announce no change to its policy in the early hours of Thursday, hence maintaining the current pace of asset purchases, the target for 10-year bond yields at 0% and its policy rate at 0.10%.
Key Events Ahead
- (10:45 ET - 14:45 GMT) - Fed Trade operation 30-yr Fannie Mae/Freddie Mac (max $1.450 bn).
- (11:00 ET - 15:00 GMT) - Commerce Department issues annual benchmark revisions to retail sales.
- (12:45 ET - 16:45 GMT) - Fed Trade operation 15-yr Fannie Mae/Freddie Mac (max $600 mn).
FX Beat
DXY: The broad USD heads into today holding just over recent lows, so far largely ignoring a rebound in US yields back to mid ranges that have been in place since yields peaked after the 15th December 2016 Fed meeting.
The index is trading in the narrow range between 98.70 and 99.33 for the past three trading session. It is currently trading around 99.03 0.2% higher. On the higher side, near term resistance is around 99.32 (23.6% retracement of 101.34 and 98.79) and any break above will take the index till 100.03 (Apr 21st high)/100.55 (55- EMA).
The near-term major support is around 98.70 and any break below will drag the index down till 98.
While the FxWirePro currency strength index for the dollar was unchanged but has been mildly bullish as the euro dropped earlier today and ECB tomorrow, eyed unchanged but players will seek signs of June change.
EUR/USD: The recent euro gains were snapped today at 1.0950 levels in earlier today.
EUR/USD breaks the high of 1.09058 and jumped till 1.09508 at the time of writing. The upward bias of EUR/USD is losing some momentum and broken back below 1.2900. Market attention now turns towards US tax reform plans announcement due today. It is currently trading around 1.08750.
The supply zone is at 1.0950 and any violation above will take the pair till 1.09785 (50% retracement of 1.16163 and 1.03400)/1.000.On the lower side, near term support is at 1.0880 and decline below targets 1.0840 (200- day MA)/1.0820/1.07800.
USD/JPY: USD/JPY has shown a huge jump from the low of 108.13 made on Apr 17th 2017 .The pair hits 111.48 at the time of writing .It is currently trading around 111.48.
Yen slips to two-weeks low as risk appetite ease after French election result. BOJ is expected to keep the interest rates unchanged at its policy meeting ending early Thursday.
Technically reversal is expected to happen if it breaks above 100- EMA in the daily chart. Any break above 111.50 (100- EMA) will take the pair till 112.19 (Mar 31st, 2017)/113.38 (50% retracement of 118.61 and 108.13).
On the lower side, any break below 110.70 will drag the pair till 110.15 (21- EMA)/109.40 (61.8% retracement of 108.13 and 111.50).
GBP/USD: Cable is trading in the narrow range between 1.27549 and 1.2845 for the past three trading session. It is currently trading around 1.28245.
The 1.2750 mark low formed after hitting high of 1.29035.Any break below this level will drag the 1.2700 (1.25126 and 1.29034)/1.2646 (100 – 4H EMA).
On the higher side, near term resistance is around 1.2850 and any break above will take the pair till 1.2900/1.2990 (161.8% retracement of 1.29035 and 1.27549).
Minor trend reversal can be seen only below 1.2500.
USD/CAD: The Canadian dollar yesterday fell half a pct to C$1.3570; it has been the least since December, against its U.S. counterpart, after U.S. Commerce Secretary Wilbur Ross said his agency will impose new anti-subsidy duties averaging 20 pct on Canadian softwood lumber imports.
USD/CAD has traded a 27 pip range thus far Wednesday, 1.3558-1.3585. Range base approximates to Tuesday’s late NY low after oil prices rallied. USD/CAD offers tipped near 1.36: large 1.3600 option expiry Thursday.
The pair has broken the major resistance of 1.35985 high made on Dec 28th, 2016 and jumped till 1.36264 at the time of writing. The break above 1.3600 confirms that decline from 1.46889 and 1.2460 will come to an end, a jump till 1.370/1.3828 is possible.
On the lower side, major near-term support is around 1.3400 and any break below will drag the pair down till 1.3300 (100- EMA)/1.3220 (Apr 13th, 2017 low). The minor support is around 1.3480.
USD/CHF: USD/CHF has been quiet 0.9920-52 in the European session, tracking EUR/USD, 100-HMA at 0.9957 levels. The pair is consolidating in narrow range between 0.99807 and 0.99186 for the past two trading session. It is currently trading around 0.99475 0.13% higher.
The near term resistance is around 1.000 and any break above target 1.0018 (55- day EMA). Any break above 1.0024 will take the pair till 1.00413 (61.8% retracement of 1.03435 and 0.98135)/1.0120/1.0170.
AUD/USD: Aussie has declined after failure swings at highs of 0.75521 while articulating. This APAC pair hits 2-week low at 0.7490 in early European session.
It is currently trading around 0.74938 0.53% lower. On the lower side, near term support is around 0.7490 and break below targets 0.7450/0.7380 likely.
The pair’s major resistance is around 0.7550 (200- day MA) and break above will take the pair till 07580/0.7610 (Apr 17th 2017 high)/0.7650.
Equities Recap
Market sentiment, by way of equity markets, remains buoyant as we head into a day bereft of data, but some event risk. As we approach President Trump’s 100 days in office - and the risk of a government shutdown - we are expected to hear about his "massive" tax plans.
Reports suggest that he plans to unveil tax cuts, including a 15% corporation tax rate, and a 10% repatriation tax on companies’ stockpile of overseas earnings, although a border-adjustment tax may not be forthcoming. These measures were discussed with Congressional leaders yesterday, some of whom may question whether the proposed fiscal measures are revenue neutral.
Strong earnings, prospect of U.S. tax cuts drive world stocks, world equity index up nearly 2 pct this week, 8 pct in 2017.
World stocks hit a record high on Wednesday after strong earnings and the prospect of tax cuts for corporate America pushed U.S. shares to stratospheric levels and the euro held on to recent gains as political concerns in France ebbed.
European shares drawn back somewhat from 20-month highs as some unsatisfactory corporate results weighed on the market but Asian stocks powered ahead. During European morning trade, the EUROSTOXX50 sank -0.31 pct, France’s CAC40 eased -0.43 pct, while Germany’s DAX30 dipped -0.12 pct and FTSE was also down by -0.09 pct.
Commodities Recap
Crude oil: Oil prices weakened further on Wednesday as data showed a rise in U.S. crude inventories and record supplies in the rest of the world cast doubt over OPEC's ability to cut output and tighten the market.
U.S. West Texas Intermediate (WTI) was trading down 4 cents at $49.52 per barrel at 0845 GMT, after gaining 0.7 pct in the previous session. The WTI price has fallen for seven of the past eight sessions.
North Sea Brent crude, the international benchmark for oil prices, eased 3 cents to $52.07 per barrel. Brent is around 8.5 pct below its April peak.
Precious metals: Gold recovered from a two-week low on Wednesday as speculators locked in some profit from recent losses, but some analysts expect further weakness due to easing political risks.
Spot gold was up 0.1 pct at $1,264.40 at 1005 GMT. Earlier in the session, prices hit a low of 1,260.90, their weakest since April 11.
U.S. gold futures edged down 0.1 pct to 1,265.80.
Gold has shed about 3 pct since touching a five-month peak on April 17.
Spot silver was flat at $17.55 an ounce after hitting over one-month low of $17.49.
Platinum fell 0.1 pct to $949, while palladium added 0.1 pct to $801.50.
Treasuries Recap
USTs: The U.S. Treasuries traded mixed ahead of the 5-year auction and Treasury Secretary Mnuchin’s speech, scheduled to be held later in the day. The yield on the benchmark 10-year Treasury jumped nearly 7 basis points to 2.30 pct, the super-long 30-year bond yields climbed nearly 6 basis points to 2.95 pct while the yield on short-term 2-year note traded over 6-1/2 basis points higher at 1.25 pct.
UK gilts: The UK gilts traded slumped ahead of the country’s Q1 gross domestic product (GDP), scheduled to be released on April 28. The yield on the benchmark 10-year gilts, rose 1-1/2 pct to 1.09 pct, the super-long 30-year bond yields also surged a little over 1 basis point to 1.72 pct while the yield on the short-term 2-year traded flat at 0.11 pct.
German bunds: The German bunds traded flat ahead of the European Central Bank’s (ECB) interest rate decision, due to be held on April 27. The yield on the benchmark 10-year bond, hovered around 0.37 pct, the long-term 30-year bond yields also traded flat at 1.12 pct and the yield on short-term 2-year bond remained steady at -0.67 pct.
Australia: The Australian government bonds declined, tracking weakness in the U.S. counterparts and after reading the upbeat consumer price inflation (CPI) for the first quarter of this year. Although q/q CPI stood pat, the annual rate helped sway investors away from safe-haven assets. The yield on the benchmark 10-year Treasury note, jumped 2-1/2 basis points to 2.64 pct, the yield on 15-year note climbed nearly 2 basis points to 3.04 pct and the yield on short-term 2-year traded 1 basis point higher at 1.70 pct.
