Market Roundup
- EUR/USD =0.24%, USD/JPY -0.2%, GBP/USD +0.05%, AUD/USD +0.25%
- DXY -0.2%, DAX -0.2%, Brent +0.75%, iron -0.7%, Gold +1.0%
- Switzerland Q1 Ind. Orders -2.2 y/y vs -7.4% revised previous
- UK Apr Mtg Approvals 40.104k vs 45.096k previous
- UK Q1 GDP 2nd take +0.4% q/q vs 0.4% previous, 0.4% exp
- UK Q1 GDP 2nd take +2.0% y/y vs 2.1% previous, 2.1% exp
- UK Preliminary Q1 Business inv. -0.5% q/q vs -2.0% previous, +0.1% exp
- UK Preliminary Q1 Business inv -0.4% y/y vs 3.0% previous, -0.1% exp
- Germany Merkel- global econ showing certain amount of stable growth
- Japan Abe- want to promote Abenomics on world stage
- Japan MoF ViceMin Asakawa - Yen intervention will stay in toolbox – FT
- Japan May Reuters Tankan mfg index +2, non-mfg +19, April +10, +23
- EU Pres Tusk – Brexit, China, Russia-Ukraine, trade on G7 agenda
- PBOC planning commercial paper exchange – 21st Century Business Herald
- Australia Q1 new CAPEX -5.2% q/q, -3% eyed
- Crude oil (Brent) breaks above $50/brl for first time in ‘16
Economic Data Ahead
- (0830 ET/1230 GMT) The U.S. Census Bureau is likely to report that durable goods orders increased 0.5 percent in April after rising 1.3 percent in March. Non-defense capital goods orders excluding aircraft are expected to gain 0.4 percent after falling 0.8 percent in March.
- (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits is likely to have declined 3,000 to a seasonally adjusted 275,000 for the week ended May 21, while continuing claims for the week ending May 13 is expected to have dropped to 2.146 M from 2.152 M.
- (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) The National Association of Realtors is likely to report that pending home sales data gained 0.6 percent in April from a 1.4 percent rise in March.
- (1030 ET/1430 GMT) The Energy Information Administration reports it’s Natural Gas Storage for the week ending May 20.
Key Events Ahead
- (1215 ET/1615 GMT) Federal Reserve Board Governor Jerome Powell will give his views on "Recent Economic Developments, the Productive Potential of the Economy, and Monetary Policy: Learning from the Recovery" before the Peterson Institute.
- N/A St. Louis Fed President James Bullard gives a lecture on the U.S. economy and monetary policy before the Official Monetary and Financial Institution Forum in Singapore.
FX Beat
USD: The dollar index, against a basket of currencies trades 0.2 percent lower at 95.21, having touched a low of 95.12 and away from a high 95.66 struck on Wednesday.
EUR/USD: The euro rose 0.2 percent to 1.11822, having touched an early high of 1.1192 and pulling away from a low of 1.1132, its lowest level since March 18 touched on Tuesday. The major traded between a narrow range amid prevailing risk-on sentiment ahead of series of U.S. economic data. Markets await Fed Chair Janet Yellen speech on Friday for more clues to the rate outlook. On the higher side major intraday resistance is around 1.1201 and any break above targets 1.1260/1.1285 in short term. The minor support is around 1.1150 and break below targets 1.1100. Any break below 1.1100 will confirm further weakness, a decline till 1.105/1.10 is possible.
USD/JPY: The Japanese yen gained, as green back was weighed down by rising speculation that the investors are opposing any gains past 110.50 yen. The yen rose to an early high of 109.41 and was trading 0.1 percent higher at 109.95. Investors believe that the officials might be forcing the yen to strengthen closer to 100 yen as Japanese authorities are not intervening on the currency at this stage. 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 declined against the euro and the dollar after data showed Britain's business investment dropped in annual terms for the first time in three years amid uncertainty around the Brexit vote. U.K's business investment fell by 0.4 percent year-on-year in the first quarter after rising 3.0 percent in the fourth quarter of the previous year. The slump was limited as the economy's preliminary gross domestic product reading stood at 0.4 percent in the January-March period, in line with consensus and previous. Sterling declined to a low of 1.4677, shortly after the data was released, however, it was trading 0.1 percent up at 1.4707, having touched a 3-week high of 1.4739 earlier in the session. Against the euro, the pound edged down 0.2 percent to 76.07 pence, rebounding from a 3-1/2 month low of 75.66 pence hit on Wednesday. On the higher side minor resistance is around 1.4740 and any break above targets 1.4770/1.4780 (200 day MA). Cable should close above 200 Days MA for further up move and any indicative break above will take the pair till 1.48500/1.4900 in short term. On the lower 1.46670 is acting as minor support and any break below targets 1.4640/1.4600 level.
USD/CHF: The Swiss franc rose as the dollar weakened across the broad. The greenback edged down to 0.9910, having declined to a low of 0.9884 earlier in the session. The short term trend is slightly bullish as long as support 0.9830 (200 DMA) 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 0.9880 will drag the pair down till 0.9850/0.9830.
AUD/USD: The Australian dollar trades 0.3 higher at 0.7219, having touched a high of 0.7229, and pulling away from a low of 0.7160 touched earlier in the session. The Aussie regained some ground after a mixed capital expenditure report showed an upgrade to overall spending plans for the year ending June 2017. 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 declined to a 2-month low following Fonterra's disappointing milk payout forecast. However, the kiwi was supported by better-than-forecast budget numbers in the year to June. The major recovered from an early low of 0.6692 and trades 0.1 percent higher at 0.6739. Immediate resistance is located at 0.6757 (10-DMA), break above could take the pair to 0.6764. On the lower side, support is located at 0.6695 (Session Low).
Equities Recap
European shares edged up after Brent crude oil advanced $50 a barrel strengthening commodity and energy-related shares, however, worries about U.S. interest rates and signs of slowdown in China capped gains.
The pan-European FTSEurofirst 300 index rose 0.2 percent, Germany's DAX added 0.3 pct, France's CAC 40 gained 0.2 pct and Britain's FTSE 100 edged up 0.1 pct.
Tokyo's Nikkei added 0.09 pct at 16,772.46, Australia's S&P/ASX 200 index gained 0.28 pct at 5,387.50 points and MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2 percent, struggling to extend its rebound from Tuesday's 12-week low.
Shanghai composite index nudged up 0.3 pct at 2,822.44 points, while CSI300 index rose 0.2 pct at 3,064.21 points. Hong Kong’s Hang Seng index edged up 0.1 pct at 20,397.11 points.
Commodities Recap
Brent oil futures rose above $50 a barrel for the first time in nearly 7-months as a global supply glut that dampened the market for nearly two years showed signs of easing. Global benchmark Brent crude oil was at $50.09 a barrel at 1018 GMT, the highest in nearly 7 months, after a larger-than-expected reduction in U.S. crude oil inventories last week. U.S. crude futures were up 30 cents at $49.86 a barrel, after touching $49.97, the highest since mid-October.
Gold edged up as the dollar's rally halted, pulling away from a 7-week low hit in the previous session, however, though gains were capped by expectations the U.S. rates could rise as early as June. Spot gold rose 0.2 percent to $1,226.87 an ounce by 1020 GMT, while U.S. gold was up 0.2 percent at $1,226.70.
Treasuries Recap
The U.S. Treasuries traded slightly firmer as investors were cautious ahead to a greater flow of data, followed by a 7-year bonds auction later in the session. The yield on the benchmark 10-year Treasury note fell 1bp to 1.863 pct and the yield on the short-term 2-year bonds dipped 1bp to 0.907 percent by 1135 GMT. The markets will now focus on jobless claims, durable goods orders and pending home sales.
The European bonds traded modestly lower after oil prices cleared $50 for the first time in 2016 and raised the prospects of a future boost to the bloc's near-zero inflation. The benchmark German 10-year bonds yield, which moves inversely to its price rose 1bp to 0.160 pct, French 10-year bunds yield climbed 1bp to 0.487 pct, Italian equivalents inched up 1bp to 1.364 pct, Netherlands 10-year bonds yield up 1bp at 0.364 pct, Portuguese 10-year bonds yield jumped 2bps to 2.981 pct, Spanish 10-year bonds yield ticked higher 2bps to 1.497 pct and British 10-year bonds yield hovered at 1.458 pct by 0930 GMT.
The German bunds slumped as investors cooled on safe-haven instruments amid gains in riskier assets including crude oil and equities. The yield on the benchmark 10-year bonds, which moves inversely to its price rose 1 basis points to 0.160 pct by 0900 GMT.
The Japanese government bonds traded nearly flat on Thursday, 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 -0.097 percent and the yield on short-term 2-year bonds hovered at -0.226 percent by 0555 GMT.
The U.K gilts traded mixed after oil prices have risen above $50 a barrel for the first time in nearly seven months as the cost of crude continues to bounce back. On the other hand, rising Brexit fear among investors supported the fixed income securities. The yield on the benchmark 10-year bonds rose 1bp to 1.465 pct and the yield on the 40-year bond dipped 1/2 basis points to 2.110 percent by 1055 GMT.
The Australian bonds gained after data showed weaker than expected private capital expenditure figure, which inserted pressure on the pace of economic growth in the first quarter. On the other hand, investors shrug off hawkish comments from Federal Reserve President and firm crude oil prices by shifting their interest towards safe-haven assets. The yield on the benchmark 10-year Treasury note which moves inversely to its price fell 3bps to 2.284 percent and the yield on the short-term 2-year bonds dipped 2bps to 1.647 percent by 0500 GMT.
The New Zealand government bonds closed higher after Fonterra Cooperative Group gave a softer than expected opening forecast for the 2017 milk payout, which it said partly reflected a strong currency, stoking expectations the Reserve Bank of New Zealand (RBNZ) will cut interest rates sooner rather than later. In the earlier Asian session, the yield on the two-year government bonds dropped 9 basis points to 2.11 percent, the lowest in more than a week. The 10-year bond yield fell about 6 basis points to 2.65 percent.
