Market Roundup
- BOJ's Sato calls for modifying policy framework
- Sato criticizes negative rates, urges flexible policy framework
- Sato: NIRP may have monetary tightening, not easing, effect
- Sato: Unnecessary to persist in hitting 2% inflation target at all costs
- Sato: Sales tax hike delay won't affect monetary policy
- Moody’s: Japan PM Abe’s decision to delay sales-tax hike credit negative
- Moody’s: Japan tax hike delay makes fiscal goals more challenging
- Japan May Consumer confidence index 40.9 vs 40.8 previous
- MoF flows wk-ended May 28 – Japan buy Y124.9bn foreign stocks, sell 549.4bn bonds, Y12.4bn bills
- MoF flows foreign investors sell Y175.3bn Japan stocks, buy Y68.0bn bonds, sell Y788.6bn bills
- China Vice Fin Min Zhu: Fed rate decisions will have big economic impact
- Zhu: US and China must up policy coordination, cooperation
- Zhu: Fed should communicate better on rates
- Australia Apr Retail sales 0.2% vs 0.4% previous, 0.3% exp
- Saudis pledge not to shock oil markets at OPEC clash looms
- Euro Zone Apr Producer prices -0.3% vs 0.3% previous, 0.1% exp
- UK May Markit/CIPS Cons PMI 51.2 vs 52.0 previous, 52.0 exp
- Summer hiring in Spain may give Rajoy pre-election boost
- FTSE could fall over 10% if UK votes to leave EU–UBS Wealth Management
- Turkish central bank to focus more on jobs, growth-presidential adviser
- Turkish PM says ‘irrational’ for Germany to approve genocide resolution
Economic Data Preview
- (0815 ET/1215 GMT) The U.S. ADP National Employment Report is likely to show that private payrolls increased 175,000 last in May after rising 156,000 jobs in April.
- (0830 ET/1230 GMT) New applications for U.S. unemployment benefits is likely to have increased 2,000 to a seasonally adjusted 270,000 for the week ended May 27, while continuing claims for the week ending May 20 is expected to have declined to 2.150 M from 2.163 M.
- (0900 ET/1300 GMT) Mexican gross fixed investment is expected to have declined 2.70 percent in the month of March on an annual basis, against a 5.2 percent rise in February from a year earlier.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Natural Gas Storage for the week ending May 27.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Crude Oil Stocks for the week ending May 27.
Key Events Ahead
- (0830 ET/1230 GMT) ECB President Draghi releases the monetary policy statement and gives a press conference.
- (0835 ET/1235 GMT) Fed Governor Jerome Powell participates in a discussion, "A Perspective on the State of Prudential Regulation" before the Securities Industry and Financial Markets Association/The Clearing House Prudential Regulation Conference, in Washington.
- (0700 ET/1300 GMT) The Bank of England Governor Mark Carney's Speech.
- (1045 ET/1445 GMT) Bank of Canada Deputy Governor Lawrence Schembri will give a presentation in Nova Scotia on the outlook for the Canadian economy.
- N/A New York Fed President William Dudley is presiding over an Economic Club of New York luncheon meeting with Alphabet Inc executive chairman Eric Schmidt.
- N/A Dallas Fed President Robert Kaplan and former Treasury Secretary Lawrence Summers speak before the Eleventh Annual Carroll School of Management Finance Conference hosted by the Carroll School of Management at Boston College.
- N/A The Organization of the Petroleum Exporting Countries (OPEC) meets in Vienna to decide on oil output policy, in its first talks with new Saudi Energy Minister Khalid Al-Falih in attendance.
- N/A Canadian Prime Minister Justin Trudeau will give a live-streamed 20-minute interview with the Winnipeg Free Press newspaper.
FX Beat
USD: The dollar index, against a basket of currencies, stood at 95.35, recovering from an early low of 95.15.
EUR/USD: The euro trades flat at 1.1189, after the European Central Bank kept the interest rate on hold at -0.4 percent, in line with market expectations. With inflation hovering around zero, well short of the bank's 2 percent objective, Draghi’s presser is likely to hold the key for further directions on the pair. The short term trend is slightly weak as long as resistance 1.12692 (261.8 % retracement of 1.11733 and 1.11140) holds. Any break above 1.112690 will take the pair to next level at 1.13050/1.1350. On the lower side major support is around 1.1100 and break below targets 1.1050/1.1000.the minor support is around 1.1150
USD/JPY: The Japanese yen advanced against the greenback, as investors were uncertain over whether the U.S. Federal Reserve will raise interest rates in June or July. The greenback slumped as low as 108.83, pulling further away from a high of 111.44 touched on Monday. The major trades 0.5 percent lower at 108.98, hovering towards sessions low. The pair faces resistance around 109.80 (10 day EMA) and break above will take the pair till 110.50/111/111.45. On the lower side any break below 109 will drag the pair till 108/107.40.
GBP/USD: Sterling edged off two-week lows facilitated by a recovery in stock markets; however, gains were capped by Britain's future in the European Union. The economy's construction PMI failed to strengthen the currency, as it showed the weakest overall growth in activity growth since June 2013, with its headline construction PMI declining to 51.2 from April's 51.9 and markets expectation 52.0. Sterling rose to 1.14468, pulling away from a low of 1.4386 hit on Wednesday, it’s lowest in two weeks. It stood at 1.4430, 0.1 percent up for the day. Against the euro, the pound was flat at 77.62 pence. Major support is around 1.4378 (50% retracement of 1.40053 and 1.4769) and any break below will drag the pair down till 1.4332 (May 16 Low)/ 1.4240. On the higher side resistance is around 1.4508 (21 day MA) and break above targets 1.4550/1.4600. Overall bearish invalidation only above 1.4740 (May 26 High).
USD/CHF: The Swiss franc edged higher against the dollar, trading 0.1 percent higher at 0.9866. The greenback continues to slump in the second consecutive session, hovering towards, session low of 0.9858. The major support is around 0.9840 (200 day MA) and any break below will drag the pair down till 0.9787/0.9700/0.9660 level. On the higher side resistance is around 0.9960 and any break above targets 1.000/1.00925/1.0140. Overall bearish invalidation is only above 1.03285.
AUD/USD: The Australian dollar slumped, retreating from 2-week highs as sluggish factory activity across the world heightened risk aversion. The Aussie trades 0.5 percent lower at 0.7217, drifting away from a high of 73 cents touched on Wednesday. The major continues to decline, amid persisting risk aversion sentiment. On the higher side resistance is around 0.7300 any break above major resistance will take the pair till 0.7336/0.7380. The major support is around 0.7209 and break below will drag the pair till 0.7180/0.7150.
NZD/USD: The New Zealand dollar declined as global risk-off sentiment is hampered commodity-linked currencies, dragging the pair back below 0.6800 handle. The kiwi failed to extend gains and reversed sharply, declining as low as 0.6783. The major trades 0.2 percent lower at 0.6798, off 0.6834 high, touched earlier in the session. Immediate support is seen at 0.6783 (Session Low), break below targets 0.6765. On the higher side, resistance is located at 0.6840 level.
Equities Recap
European shares were subdued, while the dollar hit a 2-week low against the yen, weighed down by growing uncertainty over whether the Fed will raise interest rates in June or July.
The MSCI All-Country World index edged down 0.1 percent, while the pan-European STOXX 600 and FTSEurofirst 300 indexes were flat. Germany's DAX slipped 0.1 pct, France's CAC 402 lost 0.15 pct and Britain's FTSE 100 rose 0.3 pct.
Tokyo's Nikkei slumped 2.32 pct to 16,562.55, Australia's S&P/ASX 200 index lost 0.90 pct to 5,275.00 points and MSCI's broadest index of Asia-Pacific shares outside Japan nudged down.
Shanghai composite index gained 0.4 pct to 2,925.23 points, while CSI300 index rose 0.2 pct to 3,167.10 points. Hong Kong’s Hang Seng index added 0.5 pct at 20,859.22 points.
Commodities Recap
Oil prices inched up and were set for their third week of gains, ahead of an OPEC meeting, while the analysts do not expected the meeting to result in restrictions on crude output. Brent crude oil futures stood at $49.75 a barrel by 1027 GMT, while U.S. West Texas Intermediate crude futures were up 12 cents at $49.13 a barrel.
Gold rose as the dollar struck a 2-week low against the yen, with markets awaiting U.S. labor data to assess whether this could strengthen the chances of an early Fed interest rate hike. Spot gold gained 0.3 percent at $1,216.56 an ounce by 1030 GMT. U.S. gold also gained 0.3 percent to $1,218.
Treasuries Recap
The U.S. Treasuries traded modestly firmer across the curve as investors were cautious ahead of lighter flow of data on Thursday, highlighted by the holiday-delayed ADP employment estimate and initial jobless claims. However, clear focus is now placed on the May employment on Friday which could go a long way in bolstering market expectations for a summer rate hike from the Fed. The yield on the benchmark 10-year Treasury note fell 1 basis point to 1.834 percent by 10:50 GMT.
The European bonds plunged on Thursday as investors expects that the European Central Bank will likely raise growth and inflation forecasts in the policy meeting decision today. Also, firm crude oil prices shifted investors from safe-haven buying. The benchmark German 10-year bonds yield, which moves inversely to its price rose 2 basis points to 0.154 percent, French 10-year bunds yield jumped 2-1/2 basis points to 0.501 percent, Irish 10-year bonds yield moved up more than ½ basis point to 0.827 percent, Italian equivalents inched higher 3 basis points to 1.420 percent, Netherlands 10-year bonds yield climbed 2 basis points to 0.366 percent, Portuguese 10-year bonds yield bounce 3 basis point to 3.156 percent, Spanish 10-year bonds yield ticked higher 3-1/2 basis point to 1.533 percent and British 10-year gilts yield rose 2 basis points to 1.394 percent by 09:20 GMT.
The German bunds slumped as investors poured into safe-haven instruments amid losses in riskier assets including crude oil and stocks. Also, investors drove-out from safe-haven buying on expectations that the European Central Bank will likely raise growth and inflation forecasts. The yield on the benchmark 10-year bonds, which moves inversely to its price rose 2 basis points to 0.150 percent by 08:40 GMT.
The Japanese long-term bonds traded nearly flat on Thursday, despite weak cues emerging from equities index. The yield on the benchmark 10-year bonds, which moves inversely to its price, rose ½ basis point to -0.109 percent, yield on super-long 40-year bonds also climbed ½ basis point to 0.413 percent and short term 2-year bonds yields hovered at -0.240 percent by 05:55 GMT.
The Australian government bonds gained as investors poured into safe-haven assets amid deepening global economic growth fears along with slowdown in Chinese economy. Nevertheless, data was only part of the story as greater focus was paid to struggles in equities. The yield on the benchmark 10-year Treasury note which moves inversely to its price fell 2 basis point to 2.282 percent and short-term 2-year bonds yield also dipped 1-1/2 basis point to 1.668 percent by 05:05 GMT.
