Market Roundup
- USD/JPY -0.65%, EUR/USD -0.12%, GBP/USD +0.07%, AUD/USD -0.04%
- DXY -0.01%, Brent -0.8%, DAX +0.02%, Iron -4.97%, Gold -0.1%
- Germany Flash May PMI 52.4 vs 51.8 previous, 52.0 exp
- EZ Flash May PMI 51.5 vs 51.7 previous, 51.9 exp
- G7 reaffirm existing FX deals, key to implement fiscal strats flexibly
- US-Japan disagreement on yen moves overshadows G7 meeting
- Japan FinMin Aso – Reaffirms FX stability importance, recent move one-sided
- G7 united against Brexit but can only hope for an “in” vote
- UK ChancExch Osborne - Britain risks year-long recession if votes for Brexit
- France FinMin Sapin – No big FX discrepancies, no need to intervene
- BoJ seen preparing for exit from easing with reserves – Nikkei
- Japan May PMI mfg – flash 47.6, lowest since Dec ’12
- Boston Fed Rosengren - US close to passing test for June rate rise – FT
- CFTC IMM CTA data – Specs cut short USD bets on Fed hike view
- Hedge funds bet against Australia’s big banks in record numbers – WSJ
- Germany’s Bayer makes offer to buy U.S. Monsanto for total value USD 62 bln incl. debt
Economic Data Ahead
- (0900 ET/1300 GMT) Mexico will report its retail sales for the month of March. In the previous month, retail sales rose from January, however, grew at their slowest pace since October 2015.
- (0945 ET/1345 GMT) Markit Economics will release its preliminary U.S. Manufacturing Purchasing Managers' Index for the month of May. The index is likely to have edged up to 51.0 from a final reading of 50.8 in April.
- (1000 ET/1400 GMT) European Commission releases its preliminary Consumer Confidence index for the month of May. The index is expected to have declined 9.0, after posting a fall of 9.3 in the prior month.
- (1030 ET/1430 GMT) The Conference Board Australia releases its leading index for the month of March. The index posted a drop of 0.3 percent in the month of February.
Key Events Ahead
- (1430 ET/1830 GMT) FedTrade Ops 30-yr Fannie Mae / Freddie Mac max $2.3 bln.
- (1830 ET/2230 GMT) Philadelphia Fed chief Patrick Harker speaks on the economic outlook at "An Evening with Federal Reserve Bank of Philadelphia President Patrick Harker" in Philadelphia.
- N/A The 69th session of the World Health Assembly takes place in Geneva, Switzerland. Speakers include WHO Director General Margaret Chan and Christiana Figueres, executive secretary of the U.N. Framework Convention on Climate Change.
FX Beat
USD: The dollar index, against a basket of currencies trades at 95.32, within the sight of 95.50 struck on Thursdays.
EUR/USD: The euro declined after Markit's flash Composite Purchasing Managers' Index, edged down to 52.9 in May against market consensus of 53.2 and previous 53.0. Preliminary manufacturing PMI also dropped to 51.5 versus market expectation of 51.9 and prior 51.7, while flash service PMI was unchanged at 53.1. The major trades flat at 1.1210, having touched an early high of 1.1242. The major resistance is around 1.12640 (4 H Kijun-Sen) and break above confirms minor bullishness, a jump till 1.12850/1.13250 is possible. On the lower side major support is around 1.11900 and any break below targets 1.11500/1.1100.
USD/JPY: The Japanese yen rose following Japan's robust set of trade data and United States warning Japan against intervening to weaken the yen. The dollar declined 0.5 percent to 109.48, pulling away from a high of 110.58 struck on Friday. Minor weakness can be seen only below 109.27 (10 day MA) levels. Any break below 109.27 will drag the pair down till 108.85 (21 day MA)/108. On the higher side major resistance is around 110.55 and any indicative break above targets 111.30/112.
GBP/USD: Sterling declined after gaining more than 1 percent against the dollar last week, with investors still concerned that a referendum could see Britons vote to leave the European Union. Investors worry that the Britain’s economy would be damaged if Britons voted to leave the EU, as the country will have face a trade deficit of 12 billion pounds, its widest in eight years, and a current account deficit that soared to 7 percent of GDP in the final quarter of 2015. Sterling dropped 0.1 percent to 1.4471. On the higher side any break above 1.4670 will take the pair till 1.4700/1.4769. The minor resistance is at 1.4550/1.4600. Minor weakness can be seen only below 1.4480 and break below targets 1.4400/1.4360. Against the euro, it trades at 77.43 pence, well off its last week's 3-1/2-month high of 76.465 pence per euro.
USD/CHF: The Swiss franc trades flat at 0.9903 against the dollar, having touched an early high of 0.9883. The greenback rose to a 10-week high of 0.9926 on Friday, to end the session at 0.9897. The short term trend is slightly bullish as long as support 0.9825 holds. On the higher side any break above 0.9930 will take the pair to next level till 0.9950/1.000. The short term trend is reversal only below 0.9500. Any violation below 0.9825 will drag the pair down till 0.9760/0.9680/0.9630.The minor support is around 0.9850.
AUD/USD: The Australian dollar trades lower at 0.7211, after making a high of 0.7259. The Aussie struggled to rebound because of the diverging interest rate outlook between the Australian and the United States economies. Markets now await for RBA Governor Glenn Steven's Speech for further momentum. The short term trend is slightly bearish as long as resistance 0.7260 (200 day MA) holds. On the higher side major resistance is around 0.7260 and break above targets 0.7300/0.7336. The major support is around 0.7180 and break below will drag the pair till 0.710/0.7000.
NZD/USD: The New Zealand dollar trades 0.3 percent higher at 0.6781, having touched a high of 0.6806 earlier in the session. The kiwi is off from a 2-month trough of 0.6710 touched last week, however, it has shed nearly 3 percent so far this month, partly on expectations that the Reserve Bank of New Zealand may cut rates at its policy review of June 9. Immediate resistance is located at 0.6811 (May 18 High), break above will take the pair to 0.6830. On the lower side, support is seen at 0.6755 (May 13 Low).
Equities Recap
European shares were volatile, while oil and bond yields declined as investors remained cautious about prospects that the Federal Reserve could raise the interest rates soon.
Europe's FTSEurofirst 300 index of leading shares, Germany's DAX and France's CAC 40 all declined as much as 1 percent in early trade, however, then rebounded into positive territory. Britain's FTSE 100 was down 0.1 pct.
Tokyo's Nikkei slumped 0.49 pct at 16,654.60, Australia's S&P/ASX 200 index lost 0.50 pct at 5,324.80 points and MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.3 percent.
Shanghai Composite index gained 0.6 pct at 2,843.65 points, while CSI300 index rose 0.3 pct at 3,087.22 points. Hong Kong’s Hang Seng index dropped 0.2 pct at 19,809.03 points.
Commodities Recap
Brent oil prices declined after Iran insisted it would not freeze crude output, returning investor attention to a global glut. Global benchmark Brent futures were at $48.15 a barrel by 1040 GMT, on course for a fourth straight day of losses for the first time in a month. U.S. crude futures traded at $47.91 a barrel, down 50 cents on Friday's close.
Gold prices slumped, hovering near 3-week lows on rising expectations that the U.S. Federal Reserve will hike interest rates as early as June. Spot gold was down 0.1 percent at $1,250.15 per ounce at 1043 GMT, still close to $1,244 touched last week, the lowest since April 28. U.S. gold futures dropped 0.1 percent to $1,251.20.
Treasuries Recap
The US Treasuries traded slightly firmer as crude oil prices slid more than one percent intra-day on rising global supply, a stronger dollar and surging output from Iran to Europe and Asia. The yield on the benchmark 10-year Treasury note dipped two basis points to 1.825 percent by 1135 GMT. Markets now look ahead to a lighter flow of data in the week ahead, highlighted by durable goods orders on Thursday, followed by GDP and University of Michigan consumer sentiment on Friday. Additionally, markets receive 2-Year Note, 5-Year Note and 7-Year Note auctions on Tuesday, Wednesday and Thursday, respectively.
The UK gilts gained as the recent polls showed the outcome of the referendum is too close to call, raising the possibility that Britain might leave the EU after 43 years of membership in the bloc. The yield on the benchmark 10-year bonds fell two basis points to 1.439 percent and the yield on short-term two-year bonds dipped one basis point to 0.436 per cent by 1110 GMT.
The Greek government bonds strengthened after Athens agreed to the latest batch of austerity measures of EUR 5.4 billion in order to qualify for a EUR 11 billion injection of bailout cash. The yield on the benchmark 10-year bonds fell 36 basis points to a six-month low at 7.218 per cent and the yield on the short-term two-year bonds dipped 20 basis points to 8.327 percent by 1000 GMT.
The European bonds advanced as decline in oil price pushed investors’ inflation expectations lower and supported demand for fixed-income assets. Also, ECB executive board member and chief economist Peter Praet’s dovish comments drove investors towards safe-haven buying. The benchmark German 10-year bonds yield fell two basis points to 0.156 per cent, French 10-year bonds yield dipped three basis points to 0.492 per cent, Irish equivalents inched lower by one basis point to 0.836 per cent, Italian equivalents tumbled one basis point to 1.473 per cent, Netherland’s 10-year bonds’ yield came down by one basis point to 0.370 per cent, Portuguese 10-year bonds yield slumped five basis points to 3.079 percent, Spanish 10-year bonds yield fell to around 1.571 per cent and British 10-year bonds yield fell one basis point to 1.446 per cent by 0855 GMT.
The Japanese government bonds traded modestly higher, tracking weak cues emerging from crude oil futures. The yield on the benchmark 10-year bonds fell one basis point to -0.100 per cent and the yield on short-term two-year bonds also dipped one basis point to -0.233 per cent by 0545 GMT.
The Australian government bonds recovered their early losses Monday as investors poured into safe-haven instruments amid losses in riskier assets including crude oil and stocks. The yield on the benchmark 10-year Treasury note fell one basis point to 2.291 per cent and the yield on the short-term two-year Treasury bond also dipped one basis point to 1.654 per cent by 1145 GMT.
The New Zealand government bonds closed lower as hawkish comments from Federal Reserve officials strengthened the bets of an interest rate hike in June. The yield on the benchmark 10-year bonds rose three basis points to 2.750 percent and the yield on short-term two-year bonds climbed four basis points to 2.220 percent.
