Market Roundup
• Atlanta Fed's Bostic says OK with "some overshoot" on inflation.
• German industrial orders fall unexpectedly.
• ECB to make up German bond buys after record-low outlay.
• Euro zone core inflation drop may be a one-off: ECB's Praet.
• ECB's Smets says stimulus likely to be phased out over summer – WSJ.
• Russia's Putin begins new presidential term, keeps Medvedev as PM.
• NAFTA talks enter critical week with U.S. pushing hard line.
• Trump defends CIA nominee, calls on her to 'win' –tweet.
• Iran says could remain in nuclear deal if its interests guaranteed –TV.
• Calls by Italian president for "neutral govt" meet immediate opposition.
Looking Ahead - Economic Data (GMT)
• 7 May 23:50 Japan Mar All Household Spending YY, 1.1% forecast, 0.1% previous
• 7 May 23:50 Japan Mar All Household Spending MM, 0.7% forecast, -1.5% previous
• 8 May N/A China APR Exports YY, 6.3% forecast, -2.7% previous
• 8 May N/A China APR Imports YY, 16% forecast, 14.4% previous
• 8 May N/A China APR Trade Balance USD, 24.70 bln forecast, -4.98 bln previous
• 8 May 01:30 Australia Mar Retail Sales MM, 0.3% forecast, 0.6% previous
• 8 May 01:30 Australia Q1 Retail Trade, 06% forecast, 0.9% previous
Looking Ahead - Events, Other Releases (GMT)
• N/A Bank of Finland governor Erkki Liikanen and deputy governor Olli Rehn speak in Helsinki
• 07:15 Federal Reserve Chairman Jerome Powell speaks in Zurich, Switzerland
• 07:30 Swedish Central Bank publishes Minutes from the Monetary Policy meeting
• 08:30 Riksbank Deputy Governor Per Jansson speaks in Stockholm
Currency Summaries
EUR/USD is likely to find support at 1.1885 levels and currently trading at 1.1923 levels. The pair has made session high at 1.1938 and hit lows at 1.1896 levels. Euro declined against the dollar on Monday as investors increased bets that rising interest rates in the United States would boost the greenback, while traders unwound their bearish positions on the currency. The index that tracks the dollar against a basket of currencies climbed to 92.974, its highest since December. It was last up 0.2 percent at 92.792.Speculators trimmed their bets on a falling dollar to the lowest in seven weeks last week, based on data from the Commodity Futures Trading Commission released on Friday. Friday's somewhat disappointing U.S. payrolls report, which showed hiring and wage growth fell short of expectations, did not alter traders' outlook for further rate increases from the Federal Reserve. The euro broke below $1.19 for the first time this year in the aftermath of weaker-than-expected data on euro zone investor sentiment. Euro zone business growth dimmed again in April but the picture remained relatively bright as new business stayed buoyant and firms managed to build up backlogs of work, a survey showed on Friday. The euro shed 0.33 percent at $1.1923 after touching $1.1896, the lowest in more than four months.
GBP/USD is supported in the range of 1.3481 levels and currently trading at 1.3555 levels. It reached session high at 1.3576 and dropped to session low at 1.3510 levels. Sterling was little changed against the dollar on Monday as the dollar's recent rally was reignited by renewed bets of higher lending rates. The U.S. dollar index hit a 2018 peak against a commodity basket after U.S. jobs and wages data did little to alter perceptions of strength in the U.S. economy and consequently expectations for more Fed rate hikes. Two Federal Reserve officials who are currently voting members of the U.S. central bank's rate-setting committee said on Friday they were keeping an open mind on the total number of interest rate rises needed this year. U.S. interest rate futures rose modestly on Friday, as traders still expect the Federal Reserve to raise key borrowing costs at its June 12-13 policy meeting in the wake of weaker-than-forecast growth in domestic payrolls and wages in April. The market was thinned by a national holiday in Britain, which closed trading desks in London. British pound was last trading at $1.3555, bouncing off a four-month low of $1.3487 set last week. Sterling has slumped in the past fortnight as investors reversed expectations of a rate hike at the Bank of England's upcoming meeting on Thursday amid soft domestic data.
USD/CAD is supported at 1.2800 levels and is trading at 1.2885 levels. It has made session high at 1.2900 and lows at 1.2838 levels. The Canadian dollar weakened against its U.S. counterpart on Monday as the greenback broadly rose, but the currency stuck to its recent holding pattern as oil prices climbed and investors weighed talks to update the NAFTA trade deal. The loonie lost ground even as the price of oil, one of Canada's major exports, rose to its highest since late 2014, boosted by the latest troubles for Venezuelan oil company PDVSA and a looming decision on whether the United States will re-impose sanctions on Iran. Senior Canadian, U.S. and Mexican officials trying to rescue slow-moving talks to update the North American Free Trade Agreement met on Monday in a new bid to resolve key issues before regional elections complicate the process. With time fast running out to strike some kind of deal on the North American Free Trade Agreement, the three member nations are still far apart on major points. Discussions in Washington will center on one particularly contentious area - the U.S. demand for tougher rules of origin governing what percentage of a car needs to be built in the NAFTA region to avoid tariffs. The Canadian dollar was trading 0.4 percent lower at C$1.2885 to the greenback, or 77.57 U.S. cents. It traded in a range of C$1.2840 to C$1.2900.
AUD/USD is supported around 0.7470 levels and currently trading at 0.7515 levels. It hit session high at 0.7558 and made session lows at 0.7490 levels. The Australian dollar edged slightly higher against dollar on Monday as upbeat domestic economic data and higher oil prices supported Australian dollar, although gains were capped ahead of the 2018 budget. The Aussie dollar nudged up to $0.7529, from a trough of $0.7490 though the technical background remained bearish. An index of Australian business conditions jumped to record-matching highs in April as firms reported broad-based strength in sales, profits and employment, suggesting the economy started the second quarter in healthy shape. Monday’s survey from National Australia Bank NAB showed its index of business conditions rose 6 points to +21 in April, far above the long-run average of +5.5 and matching the highest reading since the survey began in 1997. The Reserve Bank of Australia (RBA) highlighted the upbeat outlook of businesses last week when it forecast economic growth would top 3 percent this year and next. Risk appetite was dampened ahead of the official 2018 budget on Tuesday. The government has promised tax cuts for lower income earners and flagged multi-billion dollar infrastructure spending. Oil prices surged to their highest since late 2014, driven by declining Venezuelan crude production and worries the Unites States could re-impose sanctions on Iran.
Equities Recap
European shares closed higher on Monday, supported by strong earning updates and gains in Nestle after the Swiss-based food firm agreed a tie-up with Starbucks.
The pan-European FTSEurofirst 300 ended the day up by 0.61 percent, Germany's Dax ended up by 1.1 percent, France’s CAC finished the day up by 0.3 percent.
Wall Street climbed on Monday, boosted by Apple's sixth straight day of gains and by a surge in oil prices to their highest since 2014.
Dow Jones closed up by 0.40 percent, S&P 500 ended up by 0.36 percent, Nasdaq finished the day up by 0.78 percent.
Treasuries Recap
Trading was light and Treasury yields were little changed on Monday ahead of this week's auctions of $73 billion in U.S. government debt and Thursday's release of the Consumer Price Index inflation metric, even as U.S. oil prices reached their highest since 2014.
Yields on benchmark 10-year U.S. Treasury notes were up slightly by 0.8 basis point at 2.952 percent - from their last close.
Yields on 30-year bonds were up just over 1 basis point at 3.125 percent from their last close. The two-year note was last at 2.497 percent, down modestly from Friday's close at 2.501 percent.
Commodities Recap
Gold slipped on Monday, snapping three days of gains as the U.S. dollar index strengthened after last week's soft U.S. jobs data did little to dampen optimism about the world's largest economy.
Spot gold was down 0.04 percent at $1,314.08 an ounce by 1:36 p.m. EDT (1736 GMT), earlier hitting a one-week high at $1,318.85. U.S. gold futures for June delivery settled down $0.60, or 0.05 percent, at $1,314.10 per ounce.
Oil prices rose for the fourth straight day on Monday to hit levels not seen since late 2014, boosted by the latest trouble for Venezuelan oil company PDVSA and the possibility that the United States could re-impose sanctions on Iran.
U.S. West Texas Intermediate (WTI) crude futures rose $1.01, or 1.5 percent, to settle at $70.73 a barrel. This was the first time since November 2014 that WTI had climbed above $70. Brent crude futures jumped $1.30, or 1.7 percent, to settle at $76.17 a barrel.
