Market Roundup
- Sterling rallies hard and EUR/GBP fall close to 1.0%
- GBP/USD +0.65%, EUR/GBP -0.97%, USD/JPY +0.41%
- DXY +0.11%, DAX +0.8%, Brent -0.35%, Iron -2.37%
- Switzerland Apr Trade Surplus CHF 2.504 bln vs 2.18 bln previous
- Germany Q1 Detailed GDP 0.7% q/q vs 0.7% previous, 0.7% exp
- Germany Q1 Detailed GDP 1.3% y/y vs 1.3% previous, 1.3% exp
- UK Apr PSNB GBP6.582 bln m/m vs 4.165 bln previous, 5.8 bln exp
- UK Apr PSNCR –GBP2.388 bln vs 16.598 bln previous
- Germany May ZEW Econ Sent 6.4 vs 11.2 previous, 12.0 exp
- Germany May ZEW Curr Cond 53.1 vs 47.7 previous, 48.9 exp
- UK May CBI Dist. Trades +7 vs -13 previous, +7 exp
- BoE Carney can achieve monetary stability whether in or out
- BoE’s Weale-Brexit would increase risk of recession
- ZEW doubt Q1 growth will continue at same pace
- Turkey-Simsek appointed deputy PM along with four others
- RBA Gov Stevens – Committed to inflation targeting
- Resurgent dollar could revive emerging market fear
- Nissan may sell entire Calsonic Kansei stake, valued at Y100 bln+ - Nikkei
- BoJ Amamiya – Presence in ETF not too large, avoid mkt disruptions
- Japan 2015 net external assets fall for first time in five years
Economic Data Ahead
- (0900 ET/1300 GMT) Mexico's annual inflation rate is likely to have risen in the first half of May, however, remaining below the central bank's target. Inflation in the 12 months through mid-May likely increased 2.67 percent, up from 2.60 percent in the first half of April.
- (1000 ET/1400 GMT) The U.S. Commerce Department is expected to report that new home sales increased 2 percent to a seasonally adjusted annual rate of 523,000 units in April. New home sales declined 1.5 percent in March to a seasonally adjusted annual rate of 511,000 units.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
- (1845 ET/2245 GMT) The Statistics New Zealand releases its trade balance data for the month of April. The economy posted a trade deficit of $3.384 billion in the month of March.
- N/A Brazil's central bank releases current account figures for the month of April. Economists expect a deficit of $900 million in April, slightly bigger than the $855 million in March.
Key Events Ahead
- N/A Euro zone finance ministers will seek to clinch a deal with Greece on a package of contingency steps to ensure Athens will meet future fiscal targets as well as reach a political agreement on future debt relief for Greece.
- N/A Michel Temer, the interim president of Brazil, is expected to announce measures to both plug the massive fiscal shortfall and restart activity as the country struggles with its second year of recession.
- (1145 ET/1545 GMT) FedTrade Ops 15-year Fannie Mae / Freddie Mac max $600 mln.
FX Beat
USD: The dollar index, against a basket of currencies rose 0.2 percent to 95.44 after touching an early of 95.54.
EUR/USD: The euro declined to 8-week low of 1.1168, down 0.4 percent on day, as the dollar strengthened across the board. The major trades lower at 1.1175, hovering towards sessions low and away from a peak of 1.1242 struck in the previous session. The pair was also weighed down by downbeat Eurozone economic sentiment data. According to ZEW survey, eurozones economic sentiment for the month of May declined to 16.8, against market consensus of 23.4 and previous 21.5. Major resistance is around 1.12425 (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 1.1150 and any break below targets 1.1100/1.1050.
USD/JPY: The Japanese yen declined against the dollar, reversing some of the previous session gains. The greenback rose 0.4 percent to 109.68, pulling away from a low of 109.11 struck in the previous session. Minor weakness can be seen only below 109 levels. Any break below 109 will drag the pair down till 108.70 (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 gained against the dollar and euro after Bank of England Chief Mark Carney defended his conduct around the Brexit referendum and stated that the central bank would be able to handle any fallout from the vote. The major was also strengthened by upbeat CBI distributive trades survey, which stood at 7 for the month of May, in line with consensus and previous -13. Sterling trades 0.9 percent higher at 1.4610, having touched a high of 1.4622. Against the euro, pound traded at 76.54 pence, rising to a 3-month high. 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, while minor weakness can be seen only below 1.4550 and break below targets 1.4480/1.4440.
USD/CHF: The Swiss franc declined against the dollar, trading 0.2 percent lower at 0.9913. The greenback rose to a high of 0.9931, pulling way from a low of 0.9883 struck in the previous session. The short term trend is slightly bullish as long as support 0.9825 holds. On the higher side any break above 0.9935 will take the pair to next level till 0.9980/1.000. The short term trend is reversal only below 0.9500. Any violation below 0.9825 will drag it down till 0.9760/0.9680/0.9630.The minor support is around 0.9850.
AUD/USD: The Australian dollar declined to a 2-1/2-month low after Reserve Bank of Australia Governor stated the central bank was committed to inflation-targeting policy, indicating that the bank might cut interest rates again this year. The Aussie trades 0.8 percent lower at 0.7160, it’s lowest since early March. The major was also weighed down by declining oil and iron prices. The short term trend is slightly bearish as long as resistance 0.7260 (200 days 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 0.7150 and break below will drag the pair till 0.710/0.7000.
NZD/USD: The New Zealand's dollar dropped 0.7 percent to a 2-month low of 0.6705 against its U.S. counterpart. The kiwi trades 0.5 percent lower at 0.6721, away from an early high of 0.6767. Markets now await U.S new home sales data and New Zealand’s trade balance figures for further cues on the pair. Immediate support is located at 0.6705 (Session Low), break below could drag the pair lower the 0.6700 mark. On the higher side, resistance is seen at 0.6770 (10-DMA).
Equities Recap
European shares continue to remain volatile as investors await for the U.S. Federal Reserve to increase interest rates as soon as next month.
Europe's FTSEurofirst 300 was up 0.2 pct, Britain's FTSE 100 gained 0.5 pct, Germany's DAX rose 0.8 pct and France's CAC climbed 1.3 pct.
Tokyo's Nikkei slumped 0.94 pct at 16,498.76, Australia's S&P/ASX 200 index ended down 0.27 pct at 5,304.40 points and MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.4 percent, taking its losses to nearly 5 percent so far this month.
Shanghai composite index and CSI300 index both declined 0.8 pct at 2,821.67 points and 3,063.56 points, respectively. Hong Kong’s Hang Seng index rose 0.1 pct at 19,830.43 points.
Commodities Recap
Oil declined for a fifth consecutive day, as the dollar gained and on increasing production from major exporters. Brent futures had dropped to $47.78 a barrel and were trading at $48.08 a barrel by 1032 GMT, while U.S. crude futures slipped 34 cents to $47.74 a barrel, having settled down 33 cents the day before.
Gold slumped and was hovering towards the $1240.00 mark, pressured by expectations that the U.S Federal Reserve will raise interest rates sooner rather than later. Spot gold fell 0.5 percent to $1,241.80 per ounce by 1034 GMT, while U.S. gold futures eased 0.5 percent to $1,245.30 per ounce.
Treasuries Recap
The US Treasuries were little changed during a relatively quiet session that saw little data of significance. The yield on the benchmark 10-year Treasury note hovered around 1.842 percent by 1040 GMT. Markets now look ahead to a lighter flow of data in the week ahead, highlighted by home sales, 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 European bonds traded modestly firmer on Tuesday as decline in oil price pushed investors’ inflation expectations lower and shifted investors towards safe-haven buying. The benchmark German 10-year bonds yield, which moves inversely to its price, fell two basis points to 0.169 percent, French 10-year bunds yield dipped two basis points to 0.506 percent, Italian equivalents tumbled one basis point to 1.483 percent, Netherlands 10-year bonds yield down one basis point at 0.384 percent, Portuguese 10-year bonds yield slumped one basis point to 3.082 percent, Spanish 10-year bonds yield hovered around 1.580 percent and British 10-year bonds yield remained steady at 1.457 percent by 0830 GMT.
The German bunds surged further after reading weaker than expected first quarter Gross Domestic Product (GDP) figure. Also, investors shifted to safe-haven buying amid losses in riskier assets including crude oil and stocks. The yield on the benchmark 10-year bunds, which moves inversely to its price fell two basis points to 0.167 percent by 0630 GMT.
The Japanese government traded nearly flat on Tuesday, succumbing to thin trading activity during a relatively quiet session that saw little data of significance. Moreover, future course in bond prices are likely to be ruled by the movements in the crude oil market. The yield on the benchmark 10-year bonds remained unchanged at -0.092 percent and the yield on short-term 2-year bonds hovered at -0.230 percent by 0455 GMT.
The U.K gilts traded flat on Tuesday, succumbing to thin trading activity during a relatively quiet session that saw little data of much significance. The yield on the benchmark 10-year bonds hovered around 1.453 percent and the yield on short-term 2-year bonds remained steady at 0.458 percent by 0955 GMT.
The Australian bonds traded nearly flat on Tuesday, bucking U.S. trends following more hawkish comments from the US Federal Reserve. The yield on the benchmark 10-year Treasury note hovered around 2.30 percent and the yield on the short-term 2-year bonds also remained unchanged at 1.66 percent by 0415 GMT.
