Market Roundup
- USD/JPY +0.13%, EUR/USD flat, GBP/USD -0.10%, EUR/CHF -0.16%
- DXY -0.1%, DAX +1.48%, Brent +1.05%. Iron -2.15%, Gold -0.5%
- USD/CAD Tight range trade continues ahead of BoC rate decision
- US Tsy Sheets – Eyes China CNY reform progress ahead of Jun dialogue – MNI
- UK Institute of Fiscal studies –Brexit could add two-years to austerity
- New Zealand April trade surplus NZ$292 mln, NZ$60 mln eyed
- Singapore bourse in exclusive talks to buy London’s Baltic Exchange
Economic Data Ahead
- (0900 ET/1300 GMT) The Federal Housing Finance Agency will release its housing price index for the month of March. The index edged up 0.4 percent in the prior month.
- (0900 ET/1300 GMT) Mexico's statistics agency releases its trade balance data for the month of April. The economy posted a $1,956 million trade deficit in March, seasonal adjusted. In non-seasonally adjusted terms, Mexico posted a trade surplus of $155 million.
- (0945 ET/1345 GMT) Markit Economics will release preliminary U.S. services PMI for the month of May. The index is expected to edge up 53.1 from 52.8 in April.
- (0945 ET/1345 GMT) Markit Economics will release preliminary U.S. composite PMI for the month of May. The index posted a final reading of 52.4 in April.
- (1000 ET/1400 GMT) Bank of Canada will announce its benchmark interest rate and the central bank is expected to hold interest rates at 0.50 percent.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Crude Oil Stocks for the week ending May 20.
- (1950 ET/2350 GMT) The Bank of Japan will release its Corporate Service Price Index for the month of March. The index is likely to remain unchanged at 0.2 percent.
Key Events Ahead
- (0900 ET/1300 GMT) The Federal Reserve Bank of Philadelphia President Patrick Harker speaks on the economic outlook before the Forum on America's Economy 2016.
- (1140 ET/1540 GMT) The Federal Reserve Bank of Minneapolis President Neel Kashkari participates in conversation on the relationship between the energy sector and monetary policy before the Williston Basin Petroleum Conference.
- (1145 ET/1545 GMT) FedTrade Operation 30-year Ginnie Mae max $1.325 bln.
- (1300 ET/1700 GMT) The Federal Reserve Bank of Dallas President Robert Kaplan participates in a moderated question-and-answer session before the Greater Houston Partnership Thought Leader Series.
- N/A Senate Banking Committee holds hearing, "Understanding the Role of Sanctions Under the Iran Deal: Administration Perspectives" with Adam J Szubin, and other witnesses to be announced, in Washington.
FX Beat
USD: The dollar index, against a basket of currencies was flat at 95.52, after rising as high as 95.661 earlier in the session, its highest since late March.
EUR/USD: The euro edged up 0.1 percent to 1.1143, having touched an early high of 1.1157, however, within the reach of 1.1132, its lowest level since March 18 touched on Tuesday. The major was supported by Germany's Ifo survey. Germany's Ifo- expectations for the month of May increased to 106.6 against market expectations of 100.8 and previous reading 100.5 (revised). Germany's Ifo current assessment and business climate also rose to 114.2 and 107.7, respectively, surpassing consensus and previous reading. Major resistance is around 1.12010 and break above confirms minor bullishness, a jump till 1.1245/1.1285 is possible. On the lower side major support is around 1.1100 and any break below targets 1.1050/1.100.
USD/JPY: The Japanese yen declined as the greenback sustained gains above the 110 level. The pair trades 0.2 percent at 110.20, having touched a high of 110.28 earlier in the session and edging closer to a 3-week high of 110.58, hit last week. The greenback continues to rise as markets speculate the Fed to raise interest rates next month. The 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 rose to a 3-1/2-month high against the euro as betting odds indicate 82.6 percent probability of Britain voting to stay in the European Union. Ratings agency S&P stated that a Brexit could damage sterling's position as a reserve currency and the associated benefits to the 'AAA' credit rating. Sterling rose 0.1 percent to 1.4652, hovering towards a 2-week high of 1.4663, it’s highest since May 3. 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. The minor weakness can be seen only below 1.4600 and break below targets 1.4550/1.4480. Against the euro, the pound strengthened to 76.01 pence, it’s strongest since early February.
USD/CHF: The Swiss franc edged up against the dollar, reversing some of its previous session losses. The greenback declined 0.1 percent to 0.9915, pulling away from a high of 0.9937 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 .9980/1.000. 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 edged up, making a minor recovery after declining nearly 4 cents so far this month. The Aussie rose 0.3 percent to 0.7206, having touched an early high of 0.7218 and pulling away from a near 3-month low of 0.7145 struck on Tuesday. However, the major’s gains were limited by falling iron ore prices and speculation that the Reserve Bank of Australia will ease policy further. The short term trend is slightly bearish as long as resistance 0.7255 (200 DMA) holds. On the higher side major resistance is around 0.7255 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 dollar rallied, after data showed a higher than expected trade surplus in the month of April. The kiwi rose 0.4 percent to 0.6763, hovering towards sessions high of 0.6767 and away from a low of 0.6705 stuck on Tuesday. Immediate resistance is located at 0.6781 (May 20 High), break above could take the pair to 0.6791. On the lower side, support is seen at 0.6728 (May 18 Low).
Equities Recap
European shares rose for a second day, supported by gains in oil prices and data showing that the U.S. economy may be strong enough to deal with a hike in interest rates.
Europe's FTSEurofirst 300 rose 0.6 pct, Germany's DAX gained 0.8 pct, France's CAC 40 added 0.6 pct and Britain's FTSE 100 advanced 0.7 pct.
Tokyo's Nikkei gained 1.57 pct at 16,757.35, Australia's S&P/ASX 200 index advanced 1.58 pct at 5,379.00 points and MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.8 percent, their best one-day gain since late March.
Shanghai composite index declined 0.2 pct at 2,815.09 points, while CSI300 index edged down 0.1 pct at 3,059.23 points. HK’s Hang Seng index rose 2.7 pct at 20,368.05 points
Commodities Recap
Oil hovered towards $50 a barrel for the first time in 7-months on expectations that declining supply will facilitate erode any overhang of unwanted crude, particularly after industry data showed a sharp drop in U.S. inventories. Brent crude futures were up at $49.26 a barrel by 1022 GMT, while U.S. crude futures rose 56 cents to $49.18 a barrel.
Gold declined to a 7-week low after Tuesday's upbeat U.S. home sales data strengthened expectations that the Federal Reserve will hike interest rate in the near term. Spot gold was down 0.4 percent at $1,221.43 an ounce at 1024 GMT, off an earlier low of $1,220.39. U.S. gold futures for June delivery were down $7.90 at $1,221.30.
Treasuries Recap
The U.S. Treasuries traded slightly firmer after data showed higher than expected homes sales data. Also rallying crude oil prices supported the cause. The yield on the benchmark 10-year Treasury note rose 1bp to 1.866 pct by 1135 GMT. Markets now look ahead to trade balance on goods, FHFA home prices and Markit US services PMI data on Wednesday, followed later by a 5-Year note auction and comments by Dallas Fed President Kaplan later in the session.
The European bonds gained after euro zone finance ministers agreed to unlock new funds for Greece and gave their firmest offer yet of debt relief. Moreover, future course in bond prices are likely to be ruled by the movements in the crude oil market. The benchmark German 10-year bonds yield, which moves inversely to its price fell 1bp to 0.166 pct, French 10-year bunds yield dipped 1bp to 0.491 pct, Italian equivalents tumbled 2bps to 1.402 pct, Netherlands 10-year bonds yield down 1bp at 0.370 pct, Portuguese 10-year bonds yield slumped 5bps to 2.982 pct, Spanish 10-year bonds yield tumbled 2bps to 1.511 pct and British 10-year bonds yield fell 2bps to 1.453 pct by 1030 GMT.
The U.K gilts strengthened 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 2bps to 1.456 pct and the yield on short-term 2-year bonds dipped 1bp to 0.476 pct by 1055 GMT.
The Greek government bonds climbed after Euro zone finance ministers agreed on debt relief and extending the repayment period and capping interest rates. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 21bps to a 6 month low at 7.070 pct and the yield on the short-term 2-year bonds dipped more than 100bps to 7.078 pct by 0855 GMT.
The Japanese government bonds traded nearly flat on Wednesday, succumbing to thin trading activity during a relatively quiet session that saw little data of much 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, which moves inversely to its price, remained unchanged at -0.095 percent and the yield on short-term 2-year bonds hovered at -0.230 percent by 0600 GMT.
The Australian bonds slumped on Wednesday, following U.S trend after higher than expected U.S economic data strengthened bets of an interest rate hike in June. Also, firm crude oil prices drove-out investors from safe-haven buying. The yield on the benchmark 10-year Treasury note which moves inversely to its price rose 3bps to 2.313 percent and the yield on the short-term 2-year bonds climbed 2bps to 1.665 percent by 0510 GMT.
