Market Roundup
• U.S., China talks focus on cutting trade deficit, China denies $200 bln target .
• US w/e ECRI Weekly Annualized, 4.3%, 4.5% previous.
• US w/e ECRI Weekly Index, 148.7, 149.3 previous .
• CA Apr CPI Inflation YY, 2.2%, 2.3% forecast, 2.3% previous.
• CA Apr CPI Inflation MM, 0.3%, 0.4% forecast, 0.3% previous.
• CA Mar Retail Sales MM, 0.6%, 0.3% forecast, 0.4% previous.
• CA Mar Retail Sales Ex-Autos MM, -0.2%, 0.5% forecast, 0.0% previous.
• CA Apr CPI BoC Core YY, 1.5%, 1.4% previous.
• CA Apr CPI BoC Core MM, 0.1%, 0.2% previous.
• CA Apr CPI MM SA, 0.1%, 0.1% previous.
• CA Apr Core CPI MM SA, 0.0%, 0.0% previous.
• CA Apr CPI Common, 1.9%, 2.0% forecast, 1.9% previous.
• Fed's Brainard says rules on low-income lending can be modernized.
• Farm bill fails in U.S. House as immigration spat roils Republican Party.
• In speech, Pompeo to call for 'broad support' against Iran.
• Italy's two maverick parties to boost spending, seek review of EU rules.
• NAFTA nations 'nowhere near' a deal - USTR Lighthizer .
• India and EU give WTO lists of US goods for potential tariff retali action.
• Putin seeks common cause with Merkel over Trump.
Looking Ahead - Economic Data (GMT)
• 22:45 May 20 New Zealand Q1 Retail Sales Volume QQ, 1.70% previous
• 22:45 May 20 New Zealand Q1 Retail Qrtly Vs Yr Ago, 5.4% previous
• 22:45 May 20 New Zealand Apr Ext Migration & Visitors, 13.00%
• 22:45 May 20 New Zealand Apr perm/Long-term Migration, 5,480 previous
• 23:50 May 20 Japan Apr Exports YY, 8.1% forecast, 2.1% previous
• 23:50 May 20 Japan Apr Apr Imports YY, 9.6% forecast, -0.6% previous
• 23:50 May 20 Japan Apr Apr Trade Balance Total Yen, 405.6 bln forecast, 797.0 bln previous
Looking Ahead - Events, Other Releases (GMT)
• 10:30 Riksbank's Per Jansson will participate in Region Kronberg's professional development initiative Tylosandsdagarna to discuss the Riksbank's role in the economy in Halmstad, Sweden
• 16:15 Atlanta Fed's Raphael Bostic speaks on "Welfare Economics: Trade and a Review of Principles" before the Atlanta Economics Club in Atlanta
• 18:15 Philadelphia Fed's Patrick Harker participates in the Chief Executives Organization's CEO Financial Seminar 2018, "Visionary Investing: Managing Late Cycle Risks and Opportunities" in New York
• 22:30 Minneapolis Fed's Neel Kashkari participates in a question-and-answer session town hall forum hosted by Bay College, Escanaba, Michigan
Currency Summaries
EUR/USD is likely to find support at 1.1700 levels and currently trading at 1.1767 levels. The pair has made session high at 1.1791 and hit lows at 1.174 5levels. The euro was headed on Friday for its fifth successive weekly decline versus the dollar, in what would be a first for the currency since 2015, as political uncertainty in Italy continued to worry investors. The euro has slumped six cents from more than $1.24 in the space of three weeks after a huge dollar rally and amid concerns about the demands of populist parties likely to form Italy's next government. On Thursday, the far-right League and 5-Star Movement agreed the basis for a governing accord that would slash taxes and ramp up welfare spending. A founding member of the EU and the euro, Italy accounts for 15.4 percent of Eurozone GDP and the parties' hostility toward the European Union stance is the biggest challenge to the bloc since Britain voted to leave two years ago. Still, some investors have played down the broader impact on the euro and questioned whether the Italian parties will really follow through on such plans. A powerful rally by the dollar is also hurting the euro. The greenback rose higher against basket of as dollar was buoyed by a further rise in U.S. Treasury yields that suggests an upbeat outlook for the world's largest economy.
GBP/USD is supported in the range of 1.3422 levels and currently trading at 1.3477 levels. It reached session high at 1.3569 and dropped to session low at 1.3499 levels. The British pound fell on Friday as the U.S. dollar resumed its rally, with confusion about whether Britain would stay in the European Union's customs union after it leaves the bloc also weighing on the currency. Prime Minister Theresa May said on Thursday Britain would leave the EU customs union after Brexit but a source said London was considering a backstop plan that would apply the bloc's external tariffs beyond December 2020. Earlier this week, the Telegraph newspaper reported that Britain would tell Brussels it was prepared to stay in the customs union beyond a Brexit transitional arrangement. As markets digested the reports, the pound initially rose before falling back. It declined further on Friday, particularly in later European trading, when the dollar extended its gains across foreign exchanges. Sterling dropped 0.4 percent to $1.3457, very close to the 2018 low of $1.3452 it hit earlier this week. Against the euro the pound had earlier fallen 0.2 percent to 87.475 pence per euro before recovering to trade flat. Sterling has slumped in recent weeks, particularly against a dollar enjoying a broad and rapid recovery.
USD/CAD is likely to find support at 1.2777 levels and is trading at 1.2878 levels. It has made intraday high at 1.2909 and lows at 1.2789 levels. The Canadian dollar weakened against its U.S. counterpart on Friday after weaker-than-expected domestic inflation dampened prospects of another Bank of Canada interest rate hike as early as this month. Canada’s annual inflation rate cooled modestly to 2.2 percent in April, short of economist expectations for 2.3 percent, as consumers paid less for travel services and gasoline prices moderated, data from Statistics Canada showed. Still, two out of three of the central bank's core inflation measures rose and separate data showed that Canadian retail sales rose by the most in five months. It fits with the Bank of Canada's view that it is going to have to raise interest rates further but "inflation isn't really pushing them to do it in a really fast way that would destabilize the household sector," said Nathan Janzen, senior economist at Royal Bank of Canada. The central bank has raised its benchmark interest rate three times since July to leave it at 1.25 percent. Chances of another hike at the May 30 announcement sank to 35 percent from nearly 50 percent before the data. The Canadian dollar was last trading 0.7 percent lower at C$1.2878 to the greenback.
USD/JPY is supported around 110.02 levels and currently trading at 110.76 levels. It peaked to hit session high at 111.05 and made session lows at 110.58 levels. The U.S. dollar edged slightly lower against the yen on Friday as policy worries increased demand for safe heaven assets as investors were watching developments in trade talks between the United States and China. U.S. President Donald Trump said on Friday he was determined to stop China from "taking our jobs, taking our money" as U.S. and Chinese negotiators met for a second day to try to avert a tariff war and find ways to boost U.S. exports to China. China earlier denied assertions from U.S. officials on Thursday night that Beijing had offered a package of concessions and goods purchases aimed at reducing the U.S. trade deficit with China by as much as $200 billion. A U.S. official said on Friday said that China's proposal was interpreted as Beijing pledging to work to achieve Washington's $200 billion trade deficit reduction goal by 2020 - a demand presented to Chinese officials two weeks ago in Beijing. The offer did not contain specifics, the U.S. official said, unlike China's decision to end its anti-dumping duties on U.S. sorghum grain, a move that was linked to the U.S.-China trade talks. In the week ahead, investors are looking to Wednesday's release of minutes from the Federal Reserve's latest monetary policy meeting for clues about the pace of the current tightening cycle.
Equities Recap
European shares ended down on the day on Friday but posted their eighth straight week of gains thanks to a rally in energy shares and despite concerns about Italian anti-establishment parties promising to increase state spending in a planned new government.
The UK's benchmark FTSE 100 closed down by 0.2 percent, FTSEurofirst 300 ended the day down by 0.32 percent, Germany's Dax ended down by 0.4 percent, and France’s CAC finished the down by 0.2 percent.
The S&P 500 ended lower on Friday after a choppy trading session as bank and chipmaker stocks weighed on the index and investors grappled with U.S.-China trade talks.
Dow Jones closed up by 0.01 percent, S&P 500 ended down 0.26 percent, Nasal finished the day down by 0.38 percent.
Treasuries Recap
U.S. 10-year Treasury yields declined on Friday from a near seven-year high as buyers emerged following a bond market sell-off earlier this week spurred by worries about growing inflation and government borrowing.
The yield on benchmark 10-year Treasury notes was down 4 basis points at 3.071 percent after touching 3.128 percent in overseas trading.
The 2-year Treasury yield was 2 basis points lower at 2.553 percent, pulling back from a nearly decade peak of 2.598 percent reached on Thursday.
The 2-year yield was on course to rise for six straight weeks, which would be the longest such streak since 10 consecutive weeks of increases in the fourth quarter of 2017.
The 30-year bond yield touched 3.264 percent earlier Friday, the highest since October 2014. It was on track for its largest weekly rise since early February.
Commodities Recap
Gold prices rebounded on Friday, as the U.S. dollar eased after Italian political tension sparked a sell-off in the country's bond markets and investors sought a safe haven in bullion.
Spot gold gained 0.2 percent at $1,292.12 per ounce by 1:33 p.m. EDT (1733 GMT), after hitting its lowest since Dec. 27 in the previous session at $1,285.41.
U.S. gold futures for June delivery settled up $1.90, or 0.2 percent, at $1,291.30 per ounce.
Oil prices fell on Friday, but Brent crude marked its sixth straight week of gains, boosted by plummeting Venezuelan production, strong global demand and looming U.S. sanctions on Iran.
Brent, which has gained about 17.5 percent since the start of the year, rose about 1.9 percent this week.
West Texas Intermediate (WTI) crude futures fell 21 cents to settle at $71.28 a barrel, a 0.29 percent loss. The contract rose about 0.9 percent for the week, its third straight week of gains.
