Market Roundup
- UK April Industrial output +2.0%m/m vs 0.3% prev, 0.0% expected.
- UK April Industrial output +1.6%m/m vs -0.2% prev, +1.6% expected.
- UK April Manufacturing output +2.3%m/m vs 0.1% prev, 0.0% expected.
- UK April Manufacturing output +0.8%m/m vs -1.9% prev, -1.5% expected.
- William Hill-Clinton 1/3 to win US presidential election, Trump 5/2.
- Japan MoF May flows – Japanese bought more for- bonds, foreign Japan interest mixed.
- Japan Q1 GDP revised up to 1.9% annualized.
- PBOC: Look to maintain ’16 growth at 6.8%, CPI likely +2.4%, exports to slide 1%.
- PBOC: Fixed asset investment +11%, real estate major uncertainty.
- China May trade surplus $49.98bn vs $58bn expected.
- ECB launches corporate bond buying in new attempt to revive inflation.
- FPO challenges Austrian presidential election result-Austrian constitutional court.
- Share of EUR in global FX reserves fell 0.6% to 19.9% in 2015-ECB.
- Public support for the EU plunges across Europe – Pew Research Center survey.
- German criticism of ECB shows it should explain decisions better-Villeroy.
- UEA’s Hanretty: Should have good idea of Brexit result by 10.30pm ET June 23.
- Hanretty: If Sunderland Brexit vote result is close ‘then remain has probably won’ overall.
Economic Data Ahead
- (0815 ET/1215 GMT) The pace of groundbreaking on new homes in Canada is expected to be relatively unchanged at 190,000 units in May.
- (1000 ET/1400 GMT) The U.S. Labor Department releases job openings and labor turnover data for April. Job openings are likely to have dropped by 85,000 to about 5.67 million in April.
Key Events Ahead
- (1145 ET/1545 GMT) FedTrade Operation 30-year Ginnie Mae (max $1.400 bn).
- Canadian Prime Minister Justin Trudeau and Finance Minister Bill Morneau appear at the Canada Summit 2016, hosted by the Economist, to outline their hope to reshape Canada's role in the global economy.
FX Beat
DXY: The dollar index, which tracks the greenback against a basket of six rivals, edged down 0.1 percent to 93.740 after dropping as low as 93.68, its lowest since May 6. DXY major resistance is around 94.30 and any break above 94.30 will take the index till 94.75/95.50 and any violation below 93.60 will drag the index down till 93.20/92.4.
USD/JPY: Recent failure above 107.56 Fibo weighs technically on USD/JPY. The pair faces major resistance at 108 and any break above confirms minor trend reversal, a jump till 109/109.55. It is currently trading around 107.73. On the lower side minor support is around 106.70 any break below 106.70 will drag the pair till 106.35/105.50. Further weakness only below 105.50 (200 W MA).
AUD/USD: AUD/USD met fresh headwind at 0.7465 in Asia. The pair spiked to hit fresh five-week highs of 0.7463 on Tuesday after RBA stood pat, but saw a corrective slide early today. On the charts we see stiff resistance by cloud base at 0.7472. Break above 0.7472 finds its next hurdle at 0.7488 (50% Fib of 0.7835 to 0.7145 fall) and then 0.7570 (61.8% Fib). We expect some consolidation at current levels. Next in focus remains the US labour data due later in the NA session ahead of the Chinese CPI data lined up for release tomorrow.
GBP/USD: Cable rose to 1.4580 after big UK industrial/manufacturing data beats. The pair has once again retreated after making a high of 1.46620 yesterday. It is currently trading at 1.45586. Short term trend is weak as long as resistance 1.4750 (200 day MA ) holds. Any break above 1.47500 will take the pair till 1.4780/1.4825. The minor resistance is around 1.4670/1.4720. On the lower side any break below 1.4500 will drag the pair till 1.4440/1.4350.
EUR/USD: EUR/USD has recovered after making a low of 1.13452 yesterday and struggling to break above 1.1400 handle. Further consolidation and calm conditions looking likely. It is currently trading around 1.13772. On the higher side major resistance is around 1.1400 and any indicative break above targets 1.1435/1.1500 level. Short term trend is slightly bullish as long as support 1.1300 holds. Any break below 1.1345 will drag the pair down till 1.1320/1.1300/1.1265. Short term bullish invalidation only below 1.11000.
USD/CHF: Post NFP unwinding of USD/CHF longs seen. USD/CHF has broken major support 0.96280 and slightly declined from that level. It is currently trading around 0.96299. Any break below 0.96280 will drag the pair down till 0.9580/0.9540/0.9500 in the short –term. On the higher side any break above 0.9660 will take the pair till 0.9695/0.9745.
Overall bearish invalidation only above 0.9960.
Equities Recap
World stocks struggled to extend gains on Wednesday after mixed Chinese data. European stocks slipped from 1-month highs hit on Tuesday. Pan-European FTSEurofirst 300 index was down 0.5 percent by 0815 GMT, the MSCI world equity index which tracks shares in 45 nations, was up 0.05 percent after rising in the previous session to the highest in more than six weeks.
Asian shares edged up on Wednesday, erasing earlier losses on upbeat Chinese imports data. The MSCI's broadest index of Asia-Pacific shares outside Japan added 0.2 percent.
Wall Street looked set to open flat to higher on Wednesday with futures on the Dow Jones, S&P and Nasdaq up around 0.1 percent.
Commodities Recap
Oil prices extended gains for a third day to hit their highest in about eight months on Wednesday. London Brent crude for August delivery was up 2 cents at $51.69 a barrel, after settling up 89 cents on Tuesday.
Gold hit a 2-week high, supported by a weaker dollar on declining expectations that the U.S. Fed will raise rates any time soon. Spot gold rose 1 percent to $1,255.20/oz by 1153 GMT, it hit a high of $1,253.66 earlier in the session, its strongest since May 23. U.S. gold climbed 0.6 percent to $1,255.40.
Treasuries Recap
US: US Treasuries were little changed during a relatively quiet session as markets continue to search for direction in the wake of the weaker than expected May employment report. Markets now look ahead to JOLTS and Quarterly Services Survey (QSS) releases that could provide a boost to both the employment picture (from JOLTS) and upward revisions for GDP (from QSS), followed by a 10-year Note auction later in the session. The short-term 2-year yield saw some downward pressure on the session, while breaking back below 0.80 percent, alongside a greater decrease in the benchmark 10-year yield, pushing back towards 1.70 percent.
Euro: The Eurozone government bonds strengthened as the European Central Bank (ECB) started buying corporate bonds from today. Also, rising political risks in Europe shifted investors towards safe-haven assets. On the contrary, crude oil prices scaled beyond the $50 mark in the Asian session, which limited the fall in bond yields. The benchmark German 10-year bonds yield fell ½ basis point to 0.049 percent, French 10-year bunds yield dipped 1/2 basis point to 0.406 percent, Italian equivalents inched lower 3 basis points to 1.318 percent, Netherlands 10-year bonds yield moved down 1 basis point at 0.274 percent, Portuguese 10-year bonds yield tumbled 3 basis points to 3.098 percent, Spanish 10-year bonds yield slid 5 basis points to 1.423 percent and British 10-year bonds yield ticked down ½ basis point to 1.263 percent by 09:45 GMT.
U.K: UK gilts slumped after data showed higher than expected April industrial production. Also, firm crude oil prices shifted traders from fixed income securities. Meanwhile, the yield on the benchmark 10-year gilts rose more than 2 basis point to 1.288 percent by 11:50 GMT.
German: The German 10-year bund yields fell to a new record low, after testing its 2015 low of 0.05 percent yesterday, are likely to test zero as soon as this week, especially if the 10-year US Treasury yield finally breaks through 1.70 percent mark. Concerns around the Brexit vote on 23rd June referendum shifted investors towards safe-haven buying. Also, rising uncertainty about developments in China and other emerging markets boosted fixed income demand. The yield on the benchmark 10-year bonds fell 2 basis points to 0.038 percent by 08:50 GMT.
JGBs: The Japanese government bonds slid as investors cooled on safe-haven instruments amid gains in riskier assets including crude oil and equities. Also, higher Q1 Gross Domestic Product (GDP) supported the cause. The yield on the benchmark 10-year bonds rose 1 basis points to -0.106 percent, yield on super long 20-year bonds also climbed 1 basis point to 0.234 percent and the yield on short-term 2-year bonds bounced ½ basis point to -0.240 percent by 08:20 GMT.
AU: The Australian government bonds gained as investors poured into safe-haven assets amid deepening global economic growth fears after the World Bank lowered its 2016 global growth forecast. Also, uncertainties about the Brexit vote and the US economy have driven a modest improvement in the Australian bond market. The yield on the benchmark 10-year Treasury note fell 4 basis points to 2.168 percent and short-term 2-year bonds yield dipped 2-1/2 basis point to 1.657 percent by 05:40 GMT.
NZ: New Zealand government bonds closed mixed as the lack of consensus in the markets over the outcome of RBNZ's June policy decision left investors confused. On the contrary, crude oil prices scaled beyond the $50 mark in the Asian session, which helped the long-term bond yields to rise. The yield on the benchmark 10-year bonds rose 1 basis point to 2.640 percent, lower than 1- year bond (6-months) yields dipped 1 basis point to 2.400 percent.
