Market Roundup
- EUR/USD -0.27%, USD/JPY 0.49%, GBP/USD -0.5%, EUR/GBP 0.23%
- DXY 0.28%, DAX flat, FTSE 0.85%, Brent 0.27%, Gold -0.53%
- China relieved U.S. trade war is "on hold"; U.S. business ambivalent
- Italy's 5-Star, League seek president's backing on PM
- ECB's Nowotny: nervousness about Italian policy under future govt, but we must wait
- BOJ wins approval for dropping its inflation target timeframe
- Turkish lira weakens to record low against dollar, eyes on central bank
- Change in BOJ's stock buying pattern stirs whisper of 'stealth tapering'
- Venezuela's re-elected Maduro faces overseas censure
- Gold hits 2018 low as trade comments lift stocks, dollar
- Oil rises as U.S. says trade war with China is 'on hold'
Economic Data Ahead
- (0830 ET/1230 GMT) The Federal Reserve Bank of Chicago will release its Chicago Fed National Activity Index (CFNAI) for the month of April. The index stood at 0.14 in the prior month.
Key Events Ahead
- (1215 ET/1615 GMT) Federal Reserve Bank of Atlanta President Raphael Bostic speaks on "Welfare Economics: Trade and a Review of Principles" before the Atlanta Economics Club in Atlanta
- (1415 ET/1815 GMT) Federal Reserve Bank of Philadelphia President Patrick Harker participates in conversation before the Chief Executives Organization's CEO Financial Seminar 2018, "Visionary Investing: Managing Late Cycle Risks and Opportunities," in New York
- (1730 ET/2130 GMT) Federal Reserve Bank of Minneapolis President Neel Kashkari participates in a moderated Q&A session town hall forum hosted by Bay College in Escanaba, Michigan
FX Beat
DXY: The dollar index surged above the 94.00 handle to hit a 5-month peak on expectations that the Federal Reserve Bank will hike at least three to four times in 2018 and easing trade tensions between U.S. and China. The greenback against a basket of currencies trades 0.2 percent up at 93.89, having touched a high of 94.06 earlier, its highest since Dec. 18. FxWirePro's Hourly Dollar Strength Index stood at -12.11 (Neutral) by 0900 GMT.
EUR/USD: The euro tumbled to a 5-month low as Italy's President is expected to confirm a coalition between the League and the Five-Star Movement (M5S) later in the day. Moreover, expectations that the Federal Reserve Bank will hike at least three to four times in 2018 strengthened the U.S. dollar. The European currency traded 0.2 percent down at 1.1742, having touched a low of 1.1716 earlier, its lowest since Nov. 14. FxWirePro's Hourly Euro Strength Index stood at 18.84 (Neutral) by 0900 GMT. Immediate resistance is located at 1.1827 (5-DMA), a break above targets 1.1938 (May 15 High). On the downside, support is seen at 1.1717 (Dec. 12 Low), a break below could drag it till 1.1700.
USD/JPY: The dollar rallied to a fresh 5-month peak as investors risk sentiment revived after U.S. Treasury Secretary Steven Mnuchin declared the U.S.-China trade war on hold following their agreement to suspend the tariff threats and continue the negotiation process. The major was trading 0.5 percent up at 111.29, having hit a high of 111.39 earlier, its highest since Jan. 18. FxWirePro's Hourly Yen Strength Index stood at -78.41 (Slightly Bearish) by 0900 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the Chicago Fed National Activity Index and Fed officials' speeches. Immediate resistance is located at 111.48 (Jan. 18 High), a break above targets 111.87 (Jan. 11 High). On the downside, support is seen at 110.37 (5-DMA), a break below could take it lower 109.85 (10-DMA).
GBP/USD: Sterling slumped to near 5-month lows as investors awaited important data on the British economy due this week that could determine whether the Bank of England tighten monetary policy as early as August. Initially, markets had expected two 25 bp rises this year, but recent weak economic data prompted traders to price in a full 25-basis-point hike by the end of 2018. The major traded 0.4 percent down at 1.3401, having hit a low of 1.3391 earlier, it’s lowest since Dec. 28. FxWirePro's Hourly Sterling Strength Index stood at -154.39 (Slightly Bearish) by 0900 GMT. Immediate resistance is located at 1.3522 (10-DMA), a break above could take it near 1.3608. On the downside, support is seen at 1.3367, a break below targets 1.3331. Against the euro, the pound was trading 0.3 percent down at 87.62 pence, having hit a high of 87.12 pence on Thursday, it’s highest since Apr. 27.
USD/CHF: The Swiss franc eased from a 2-week peak hit in the previous session as the greenback surged against a basket of currencies after the U.S.-China trade war was declared on hold. The major trades 0.3 percent up at 0.9997, having touched a low of 0.9950 on Friday, it’s lowest since May 2. FxWirePro's Hourly Swiss Franc Strength Index stood at -17.95 (Highly Bullish) by 0900 GMT. On the higher side, near-term resistance is around 1.0056 (May 10 High) and any break above will take the pair to next level till 1.0099 (May 2017 High). The near-term support is around 0.9936 and any close below that level will drag it till 0.9899.
Equities Recap
European shares gained in early trade as easing trade war worries boosted risk sentiment, while the euro plunged after Italy's far-right League and the 5-Star Movement agreed on a candidate to lead their planned coalition government and implement spending plans.
The pan-European STOXX 600 index rallied 0.4 percent at 394.26 points, while the FTSEurofirst 300 index surged 0.4 percent to 1,554.28 points.
Britain's FTSE 100 trades 0.8 percent up at 7,844.58 points, while mid-cap FTSE 250 rose 0.6 percent to 21,112.39 points. France's CAC 40 trades 0.7 percent higher at 5,653.00 points.
Commodities Recap
Crude oil prices rose, boosted by a rally across stocks and other commodities after the United States said it had put a looming trade war with China on hold. International benchmark Brent crude was trading 0.1 percent up at $78.69 per barrel by 0909 GMT, having hit a high of $80.47 on Thursday, its highest since Nov. 2014. U.S. West Texas Intermediate was trading 0.3 percent up at $71.52 a barrel, after rising as high as $72.28 on Thursday, its highest since Nov. 2014.
Gold prices declined to a near 5-month low, as the dollar rallied after U.S. Treasury Secretary Steven Mnuchin said a trade war between China and the United States was on hold. Spot gold was down 0.6 percent at $1,284.55 per ounce at 0912 GMT, after earlier hitting $1,281.99, its lowest since Dec. 27. U.S. gold futures for June delivery were 0.7 percent lower at $1,282.50.
Treasuries Recap
The U.S. Treasuries remained lower ahead of the Federal Open Market Committee’s (FOMC) members Bostic, Harker and Kashkari’s speech scheduled for today at 12:15GMT, 14:05GMT and 17:30GMT respectively. The yield on the benchmark 10-year Treasuries rose 1 basis point to 3.07 percent, the super-long 30-year bond yields remained tad higher at 3.21 percent and the yield on the short-term 2-year traded 2 basis points higher at 2.57 percent.
The UK gilts remained mixed in a muted trading session ahead of Bank of England (BoE) Governor Mark Carney’s speech, scheduled to be held on May 22 and consumer price inflation (CPI) data for the month of April, due on May 23 for further direction in the debt market. The yield on the benchmark 10-year gilts, slipped nearly 1-1/2 basis points to 1.48 percent, the super-long 30-year bond yields hovered around 1.90 percent and the yield on the short-term 2-year traded flat at 0.82 percent.
The New Zealand bonds jumped at the time of closing after the country’s retail sales data for the first quarter of this year declined, thus providing support to debt prices. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, slumped 4 basis points to 2.85 percent, the yield on the long-term 20-year note also plunged 4 basis points to 3.39 percent and the yield on short-term 2-year too closed 1-1/2 basis points lower at 1.87 percent.
The Japanese government bonds gained during late Asian session as investors have shrugged-off the better-than-expected trade surplus for the month of April, leading to a rise in bond prices. The yield on the benchmark 10-year JGB note, which moves inversely to its price, remained tad lower at 0.05 percent, the yield on the long-term 30-year note also slid slightly to 0.76 percent and the yield on short-term 2-year remained nearly 1 basis point lower at -0.13 percent.
The Australian government bonds gained on the first trading day of the week tracking firmness in the U.S. Treasuries. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 4-1/2 basis points to 2.874 percent, the yield on the long-term 30-year Note dipped 5 basis points to 3.363 percent and the yield on short-term 2-year down 2 basis points to 2.042 percent.
