Market Roundup
- EUR/USD 0.2%, USD/JPY -0.78%, GBP/USD -0.15%, EUR/GBP 0.37%
- DXY -0.12%, DAX -1.8%, FTSE -1.03%, Brent -2.99%, Gold 0.8%
- Trump vows rapid, high tariffs on Mexico unless illegal immigration ends
- Yen surges as Trump's Mexico threat fuels recession fears
- U.S., China firms scramble as new tariffs hurt business
- UK business lobby warns PM hopefuls: No-deal Brexit will cause severe damage
- Pound heads for biggest monthly loss vs euro in two years, beset by Brexit
- Bank of Italy warns 2019 public debt could rise more than forecast
- China c.bank may open taps with cash shortfall looming
- Germany Apr Retail Sales YY Real, 4.0%, 1.1% f'cast, -2.1% prev, -2.0% r'vsd
- Great Britain May Nationwide House Price YY, 0.6%, 1.2% f'cast, 0.9% prev
- Italy Q1 GDP Final QQ, 0.1%, 0.2% f'cast, 0.2% prev
- Italy Q1 GDP Final YY, -0.1%, 0.1% f'cast, 0.1% prev
- Italy May CPI (EU Norm) Prelim MM, 0.1%, 0.2% f'cast, 0.5% prev
- Oil poised for biggest monthly drop in 6 months on trade wars
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. Commerce Department releases personal income figures for April, which is expected to rise 0.3 percent after gaining 0.1 percent in the previous month.
- (0830 ET/1230 GMT) The U.S. Commerce Department releases the personal consumption expenditures (PCE) price index for the month of April. The index rose 0.2 percent in the prior month, while core PCE is likely to have increased 0.2 percent, after remaining flat in March.
- (0830 ET/1230 GMT) The U.S. Personal spending is likely to surge 0.2 percent in April, after rising 0.9 percent in the month before.
- (0830 ET/1230 GMT) The U.S. Labor Department will release its employment cost index for the seceond quarter. The index is expected to rise 0.2 percent.
- (0830 ET/1230 GMT) Statistics Canada releases its Raw Material Price Index for the month of April. The index posted a rise of 2.8 percent in March.
- (0830 ET/1230 GMT) Statistics Canada will report its industrial producer prices for the month of April. The indicator rose 0.3 percent in the prior month.
- (0830 ET/1230 GMT) Statistics Canada is expected to report that gross domestic product increased 0.3 percent in March, compared to a 0.1 percent fall in February.
- (0945 ET/1345 GMT) Chicago Purchasing Managers' Index is likely to show that business conditions index rose to 53.7 in May from 52.6 last month.
- (1000 ET/1400 GMT) The University of Michigan is likely to report that U.S. consumer sentiment index eased to 101.5 in May from 102.4 in April.
- (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count.
Key Events Ahead
- (0915 ET/1315 GMT) Federal Reserve Bank of Atlanta President Raphael Bostic moderates conversation, "Assessing the Global Economy: an Insider's Look" before the Hope Global Forums 2019 Annual Meeting in Atlanta
- (1200 ET/1600 GMT) Federal New York releases text of President John Williams' speech, "Monetary Policy Theory and Practice and the Lower Bound on Interest Rates"
FX Beat
DXY: The dollar index tumbled from a 1-week peak hit in the previous session as markets aggressively priced in deeper rate cuts by the Federal Reserve this year, amid fears that the U.S. economy was heading towards a recession. The greenback against a basket of currencies traded 0.1 percent down at 98.05, having touched a high of 98.28 on Thursday, its highest since May 23. FxWirePro's Hourly Dollar Strength Index stood at 70.66 (Bullish) by 1000 GMT.
EUR/USD: The euro rebounded from a 1-week low, as the greenback weakened on increasing speculation the U.S. Federal Reserve could cut interest rates this year. However, the pair recovery appears fragile as investors remained cautious after the Bank of Italy warned that public debt could rise more than forecast by the government in relation to domestic output this year. The European currency traded 0.2 percent up at 1.1151, having touched a low of 1.1116 on Thursday, its lowest since May 23. FxWirePro's Hourly Euro Strength Index stood at 23.04 (Neutral) by 1000 GMT. Immediate resistance is located at 1.1188 (May 21 High), a break above targets 1.1229 (Apr. 30 High). On the downside, support is seen at 1.1106 (May 23 Low), a break below could drag it below 1.1075 (May 18, 2017, Low).
USD/JPY: The dollar plunged to a 4-month low below the 109.00 handle, as Trump's new threat of tariffs on Mexico over illegal immigration, escalating trade tensions between Washington and Beijing, disappointing Chinese manufacturing activity figures stoked concerns of a global economic slowdown. The major was trading 0.8 percent down at 108.72, having hit a low of 108.71, its lowest since Jan. 31. FxWirePro's Hourly Yen Strength Index stood at 100.39 (Highly Bullish) by 1000 GMT. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. personal consumption expenditure - price index, Chicago Purchasing Managers' index and Michigan consumer sentiment. Immediate resistance is located at 109.96 (May 16 High), a break above targets 110.36 (May 23 High). On the downside, support is seen at 108.49 (Jan. 31 Low), a break below could take it lower at 107.98 (Jan, 14 Low).
GBP/USD: Sterling slumped to a 5-month low as the imminent departure of Theresa May as prime minister deepened fears about a chaotic separation from the European Union. The major traded 0.2 percent down at 1.2585, having hit a low of 1.2571 earlier; it’s lowest since Jan, 3. FxWirePro's Hourly Sterling Strength Index stood at -86.67 (Slightly Bearish) 1000 GMT. Immediate resistance is located at 1.2673 (10-DMA). a break above could take it near 1.2747 (May 27 High). On the downside, support is seen at 1.2556, a break below targets 1.2529 (Dec. 18 Low). Against the euro, the pound was trading 0.4 percent down at 88.60 pence, having hit a low of 88.89, it’s lowest since Jan. 16.
USD/CHF: The Swiss franc rallied to a 4-day peak, as investors feared President Donald Trump's threat to impose new tariffs on Mexico risked sending the United States into recession. The major trades 0.3 percent down at 1.0048, having touched a high of 1.0098 on Thursday; it’s highest since May 23. FxWirePro's Hourly Swiss Franc Strength Index stood at 101.72 (Highly Bullish) by 1000 GMT. On the higher side, near-term resistance is around 1.0121 (May 17 High) and any break above will take the pair to next level till 1.0158 (May 10 High). The near-term support is around 1.0050 (May 14 Low), and any close below that level will drag it till 0.9997 (April 12 Low).
Equities Recap
European shares tumbled to a more than 3-month low, weighed down by losses in the auto index after President Donald Trump threatened tariffs on Mexican imports.
The pan-European STOXX 600 index slumped 1.4 percent at 367.05 points, while the FTSEurofirst 300 index plunged 1.3 percent to 1,446.17 points.
Britain's FTSE 100 trades 1.03 percent down at 7,143.48 points, while mid-cap FTSE 250 declined 0.9 to 18,929.58 points.
Germany's DAX fell 1.9 percent at 11,677.44 points; France's CAC 40 trades 0.4 percent lower at 5,170.47 points
Commodities Recap
Crude oil prices declined by more than 5 percent and were on track for its biggest monthly drop in six months as comments from U.S. President Donald Trump ramped up trade tensions, weighing on the demand outlook. International benchmark Brent crude was trading 4.7 percent lower at $63.59 per barrel by 1000 GMT, having hit a low of $63.08, its lowest since Feb. 13. U.S. West Texas Intermediate was trading 2.1 percent down at $55.25 a barrel, after falling as low as $55.64 earlier, its lowest since the Mar. 8.
Gold prices rose and were heading towards their first monthly gain since January, as demand for safe-haven assets surged after U.S. President Donald Trump vowed to levy tariffs on all imports from Mexico, stoking concerns of a global economic slowdown. Spot gold was trading 0.8 percent up at $1,298.57 per ounce by 1006 GMT, having touched a high of $1,298.94 earlier, its highest since May 15 and has risen about 0.9 percent so far this month and about 0.8 percent over the week. U.S. gold futures rose 0.6 percent to $1,294.70 an ounce.
Treasuries Recap
The U.S. 10-year Treasury yield continued to trade at the new low touched during overnight session Thursday, still tracking disappointment from the lower-than-expected Q1 2019 GDP, exacerbated by further trade war comments from President Donald Trump this time with respect to Mexico, which further weighed on global market sentiments. The yield on the benchmark 10-year Treasury yield plunged 6 basis points to 2.166 percent, the super-long 30-year bond yields slumped nearly 5 basis points to 2.605 percent and the yield on the short-term 2-year plummeted 7 basis points to 2.004 percent.
The German bund yields plunged during European trading session following a lower-than-expected reading of the country’s retail sales for the month of April, while investors continue to focus on the consumer price inflation (CPI) data for the month of May, scheduled to be released today shortly, for further direction in the debt market. The German 10-year bond yields, which move inversely to its price, slumped 3-1/2 basis points to -0.206 percent, the yield on 30-year note plunged 5 basis points to 0.429 percent and the yield on short-term 2-year traded 2-1/2 basis points lower at -0.668 percent.
The Japanese government bonds closed higher on the last trading day of the week, following dovish comments from Federal Open Market Committee (FOMC) member Richard Clarida in his overnight speech. The yield on the benchmark 10-year JGB note, which moves inversely to its price, slightly slipped to -0.095 percent, the yield on the long-term 30-year edged 1-1/2 basis points lower to 0.466 percent and the yield on short-term 2-year remained flat at -0.173 percent
The Australian government bonds gained sharply during Asian session on hopes that the Reserve Bank of Australia will cut interest rate on June 4. Market is pricing a 25 basis points rate, the probability attached to a cut remained at 100 percent. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell over 5-1/2 basis points to 1.470 percent, the yield on the long-term 30-year bond dipped over 4-1/5 basis points to 2.155 percent and the yield on short-term 2-year down 2-1/2 basis points to 1.128 percent.
