Market Roundup
- EUR/USD 0.68%, USD/JPY 0.11%, GBP/USD 0.12%, EUR/GBP 0.61%
- DXY -0.45%, DAX 0.49%, FTSE 0.26%, Brent 0.34%, Gold -0.07%
- Italy renews attempt to form coalition and end turmoil
- Trade war risk stalks global economic upturn – OECD
- Italy's crisis could become a disaster, warns Germany's DIHK
- OECD says Japan should keep monetary easing but remain open to tweaks
- IMF maintains China's 2018 GDP growth forecast at 6.6 pct
- EU Business Climate, 1.45, 1.30 forecast, 1.35 previous
- EU Economic Sentiment, 112.5, 112.1 forecast, 112.7 previous
- EU Industrial Sentiment, 6.8, 6.7 forecast, 7.1 previous
- EU Services Sentiment, 14.3, 14.5 forecast, 14.9 previous
- EU Consumer Confidence. Final, 0.2, 0.2 forecast, 0.3 previous
- EU Cons Inflation Expectations, 17.5, 16.1 previous
- Germany Import Prices YY, 0.6%, 0.7% forecast, -0.1% previous
- Germany Retail Sales YY Real, 1.2%, 1.3% forecast, 1.3% previous
- Germany Unemployment Change SA, -11k, -10k previous, -7k previous
- Germany Unemployment Rate SA, 5.2%, 5.3% forecast, 5.3% previous
- France GDP Detailed QQ, 0.20%, 0.30% forecast, 0.30% previous
- France Consumer Spending MM, -1.5%, -0.2% forecast, 0.1% previous
- China vows to protect its interests from "reckless" U.S. trade threats
- US, EU can still talk trade after tariffs, US envoy says
Economic Data Ahead
- (0815 ET/1215 GMT) Payrolls processor ADP releases U.S. employment report for the month of May. The report is expected to show that 190,000 jobs were added as compared with 204,000 jobs in the previous month.
- (0830 ET/1230 GMT) The U.S. Commerce Department is expected to report that second estimate of gross domestic product remained at 2.3 percent annual rate in the first quarter.
- (0830 ET/1230 GMT) The U.S. Commerce Department releases the preliminary personal consumption expenditures (PCE) price index for the first quarter. The index is expected to rise 2.7 percent, while core PCE is likely to increase at 2.5 percent.
- (0830 ET/1230 GMT) The U.S. Census Bureau is likely to report that preliminary wholesale inventories rose 0.4 percent in April after posting a gain of 0.3 percent in March.
- (0830 ET/1230 GMT) The United States releases goods trade balance data for the month of April. The economy recorded a trade deficit of $68.04 billion in the previous month.
- (0830 ET/1230 GMT) The Statistics Canada releases its Raw Material Price Index for the month of April. The index posted a rise of 2.1 percent in March.
- (0830 ET/1230 GMT) The Statistics Canada will report its industrial producer prices for the month of April. The indicator rose 0.8 percent in the prior month.
- (0830 ET/1230 GMT) The Statistics Canada is likely to report that current account deficit widened to C$18.00 billion in the first quarter, compared with a deficit of C$16.35 billion in the previous quarter.
- (1000 ET/1400 GMT) Bank of Canada will meet to announce its benchmark interest rate, where it is expected to hold interest rates steady at 1.25 percent.
- (1400 ET/1800 GMT) The Fed issues its Beige Book, a summary of anecdotes on the health of the economy.
- (1630 ET/2030 GMT) API reports its weekly crude oil stock.
Key Events Ahead
- (1045 ET/1445 GMT) The Swiss National Bank Chairman of the Governing Board Thomas J. Jordan's speech.
- (1500 ET/1900 GMT) The U.S. Federal Reserve at a meeting of its board will consider a proposal to modify the "Volcker Rule" banning proprietary trading by banks.
FX Beat
DXY: The dollar index eased from 2018 highs ahead of U.S. ADP report on private sector employment and the second estimate of Q1 GDP growth figures. The greenback against a basket of currencies trades 0.6 percent down at 94.30, having touched a high of 95.03 the day before, its highest since Nov. 7. FxWirePro's Hourly Dollar Strength Index stood at 9.29 (Neutral) by 1000 GMT.
EUR/USD: The euro rebounded from 6-1/2 month lows touched in the prior session, after data showed German retail sales rose more than expected in April, indicating that household spending will support growth in the second quarter. However, concerns about a deepening political crisis in Italy limited gains. The European currency traded 0.6 percent up at 1.1613, having touched a low of 1.1510 on Tuesday, its lowest since Jul. 20. FxWirePro's Hourly Euro Strength Index stood at -48.81 (Neutral) by 1000 GMT. Immediate resistance is located at 1.1645 (5-DMA), a break above targets 1.1716 (10-DMA). On the downside, support is seen at 1.1479 (Jul. 20 Low), a break below could drag it till 1.1434 (Jul. 17 Low).
USD/JPY: The dollar rose from recent lows as a rise in the U.S. Treasury bond yields and renewed optimism over the US-North Korea summit dented the Japanese Yen's safe-haven appeal. However, ongoing political turmoil in Italy might continue to keep a lid on the rebound. The pair was trading 0.1 percent up at 108.88, having hit a low of 108.11 the day before, its lowest since May 8. FxWirePro's Hourly Yen Strength Index stood at 48.11 (Neutral) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. prelim gross domestic product price index, wholesale inventories, goods trade balance, and personal consumption expenditure prices. Immediate resistance is located at 109.36 (5-DMA), a break above targets 110.22. On the downside, support is seen at 108.11 (May 29 Low), a break below could take it lower 107.65 (Apr. 23 Low).
GBP/USD: Sterling steadied above the 1.3200 handle as investors awaited UK's GFK Consumer Confidence Index, which is expected to come in at -8 in May, versus the previous period's reading of -9. Data released on Tuesday showed British shop prices declined in May by the most since the start of 2017, adding to signs that a rise in inflation after the 2016 Brexit vote has peaked. Sterling traded 0.2 percent up at 1.3271, having hit a low of 1.3204 on Tuesday, it’s lowest since Nov. 28. FxWirePro's Hourly Sterling Strength Index stood at -120.60 (Highly Bearish) by 1000 GMT. Immediate resistance is located at 1.3318 (5-DMA), a break above could take it near 1.3390 (10-DMA). On the downside, support is seen at 1.3169 (Nov. 17 Low), a break below targets 1.3135 (Nov. 16 Low). Against the euro, the pound was trading 0.6 percent down at 87.53 pence, having hit a high of 86.97 pence on Tuesday, it’s highest since Apr. 27.
USD/CHF: The Swiss franc edged up, extending previous session gains as the greenback retreated from recent peaks. On Tuesday, Swiss National Bank Chairman Thomas Jordan stated that the currency markets remain fragile and the central bank will stick to its current course after political turmoil in Italy sent the Swiss franc to multi-week peaks. The major trades 0.1 percent down at 0.9904, having touched a high of 0.9983 the day before, it’s highest since May 22. FxWirePro's Hourly Swiss Franc Strength Index stood at 102.92 (Highly Bullish) by 1000 GMT. On the higher side, near-term resistance is around 0.9952 (21-DMA) and any break above will take the pair to next level till 1.0018 (May 18 High). The near-term support is around 0.9871 (Apr. 30 Low) and any close below that level will drag it till 0.9816 (Apr. 26 Low).
Equities Recap
European shares slumped on concerns over a deepening political crisis in Italy and renewed U.S.- China trade war fears.
The pan-European STOXX 600 index plunged 0.2 percent at 383.10 points, while the FTSEurofirst 300 index declined 0.05 percent to 1,504.86 points.
Britain's FTSE 100 trades 0.2 percent up at 7,643.85 points, while mid-cap FTSE 250 rallied 0.2 percent to 20,778.24 points.
Germany's DAX rose 0.3 percent at 12,702.89 points; France's CAC 40 trades 0.6 percent lower at 5,405.38 points.
Commodities Recap
Crude oil prices gained, supported by tight supplies despite expectations OPEC and its allies will pump more in the second half of 2018. International benchmark Brent crude was trading 0.6 percent up at $75.82 per barrel by 1003 GMT, having hit a low of $74.46 on Monday, its lowest since May 8. U.S. West Texas Intermediate was trading 0.2 percent up at $66.96 a barrel, after falling as low as $65.83 on Monday, its lowest since Apr. 17.
Gold prices declined, undermined by a robust U.S. dollar, however, concerns about political turmoil in Italy and Sino-U.S. trade conflict limited downside. Spot gold was 0.1 percent lower at $1,297.37 per ounce by 1005 GMT, having hit a high of $1,307.65 on Friday, its highest price level since May 15. U.S. gold futures for June delivery were down 0.3 percent at $1,295.40 per ounce.
Treasuries Recap
The U.S. Treasuries more than offset the losses seen over the past 24 hours as investors turned risk-takers after reports claimed that Italy’s 2 biggest political parties – 5-Star and the League have taken a step forward in forming a coalition government and reach an agreement on the selection of economy minister. The yield on the benchmark 10-year Treasuries remained jumped 11 basis points to 2.87 percent, the super-long 30-year bond yields surged 8-1/2 basis points to 3.05 percent and the yield on the short-term 2-year traded 9 basis points higher at 2.41 percent.
The United Kingdom’s gilts plunged after Italy’s 5-Star and the League Party were seen to gather efforts towards the formation of a new government after days of political uncertainties that rattled financial markets to the core. The yield on the benchmark 10-year gilts, jumped 5 basis points to 1.24 percent, the super-long 30-year bond yields surged 4-1/2 basis points to 1.72 percent and the yield on the short-term 2-year traded 4 basis points higher at 0.63 percent.
The German 10-year bund yields started to recover on a serious note during European session, tracking the country’s better-than-expected employment report for the month of May despite Italy being faced with a political challenge since a week. The German 10-year bond yields, which move inversely to its price, jumped 5-1/2 basis points to 0.32 percent, the yield on the 30-year note climbed nearly 3-1/2 basis points to 1.05 percent and the yield on short-term 2-year also traded 3-1/2 years higher at -0.74 percent.
The New Zealand bonds joined the global chorus for safe-haven demand at the time of closing, tracking a similar movement in the U.S. counterpart, as Italy’s political matter started getting worse and hence, investors shifted to risk-averse assets like debt papers. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, slipped 1 basis point to 2.76 percent, the yield on the long-term 20-year note slumped 2 basis points to 3.27 percent and the yield on short-term 2-year closed 2-1/2 basis points lower at 1.88 percent.
The Japanese government bonds hovered around yesterday’s lows during late Asian session as demand for safe-haven instruments shot up globally, tracking deepening political fears over Italy and other geopolitical tensions. The 10-year JGB yield registered a low of 0.023, while climbing to its intra-day high of 0.044, while on Wednesday, the Japanese debt market remained almost range-bound within 0.024-0.030 and close to the previous low. The yield on the benchmark 10-year JGB note, which moves inversely to its price, slipped 1 basis point to 0.02 percent, the yield on the long-term 30-year note slumped 2 basis points to 0.70 percent and the yield on short-term 2-year traded tad lower at -0.14 percent.
The Australian 10-year government bond yield worsened performance to near 2-month low as investors bumped into safe-haven assets on deepening fears over the global geopolitical situations as Italy faces an intense political crisis, evolving from the hung Parliament, a result of the March elections. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, plunged 8-1/2 basis points to 2.63 percent, the yield on the long-term 30-year Note also slumped 8-1/2 basis points to 3.18 percent and the yield on short-term 3-year traded nearly 5 basis points down at 2.08 percent.
