Market Roundup
• Israeli forces kill dozens in Gaza as U.S. Embassy opens in Jerusalem.
• Fed's Bullard says U.S. yield curve might invert by early 2019.
• Cryptocurrencies only adding to tangled market - Fed's Bullard.
• Pompeo reaches out to European counterparts amid Iran tensions.
• ECB policymakers stick to upbeat narrative despite slowdown.
• ECB says the excess cash it created could backfire: Coeure.
• IMF presses German govt to invest more to reduce trade surplus.
• IMF says supports Argentina floating exchange rate as peso tumbles.
• "The clock is ticking" - EU warns Britain of poor Brexit progress .
• Canada home prices rise in April - Teranet .
• With glut almost gone, OPEC still cuts more than oil pact demands.
Looking Ahead - Economic Data (GMT)
• 02:00 China Retail Sales YY, 10.0% forecast, 10.1% previous
• 02:00 China Industrial Output YY, 6.3% forecast, 6.0% previous
• 02:00 China Urban Investment (ytd)yy 7.4% forecast, 7.5% previous
Looking Ahead - Events, Other Releases (GMT)
• 07:25 Riksbank First Deputy Governor Kerstin af Jochnick will discuss current monetary policy at SvD Investor Summit
• 12:00 Federal Reserve Bank of Dallas President Robert Kaplan participates in session on "Energy, Trade, and Economic Growth" in New York
• 14:00 Senate Banking Committee holds hearing on the nominations of Richard Clarida to be a member and vice chairman and Michelle Bowman to be a member of the Federal Reserve Board of Governors
• 17:10 Federal Reserve Bank of San Francisco President John Williams speaks before the Economic Club of Minnesota in Minneapolis
Currency Summaries
EUR/USD is likely to find support at 1.1900 levels and currently trading at 1.1942 levels. The pair has made session high at 1.1994 and hit lows at 1.1933 levels. The euro dipped against US dollar on Monday as U.S. dollar fell as investors questioned whether a rally that last week sent the greenback to more than four-month highs had run out of steam.The dollar has gained as a rise in U.S. Treasury yields highlighted the wide interest rate gap between the United States and other countries. Soft April U.S. consumer price data last week, however, introduced doubts about expectations that the Federal Reserve would raise rates as many as four times in 2018. The index fell as low as 92.243 on Monday, the lowest since May 2, before rising back to 92.619, up 0.09 percent on the day. It has dropped from 93.416 last Wednesday, the highest since Dec. 22.The euro had strengthened earlier on Monday after European Central Bank policymaker Francois Villeroy de Galhau said that the ECB could give fresh guidance on the timing of its first rate hike as the end of its exceptional bond purchases approaches. Growing worries about the U.S. budget deficit, which is projected to balloon to more than $1 trillion in 2019 due to a government spending splurge and large corporate tax cuts, have also dimmed the outlook for the greenback, along with concerns about the country's current account deficit. Investors are focused this week on speeches by Fed and ECB officials, as well as German data on Tuesday that is expected to show some slowdown in economic growth.
GBP/USD is supported in the range of 1.3493 levels and currently trading at 1.3566 levels. It reached session high at 1.3608 and dropped to session low at 1.3554 levels. Sterling declined against dollar on Monday, erasing all its earlier gains as dollar recovered ahead of key U.S. data. The dollar also rose Traders expect the U.S. central bank will raise key overnight borrowing costs at least two more times in 2018, with the next hike likely at its June 12-13 policy meeting.The pound initially rose 0.4 percent against the dollar to $1.3595, but reversed course to trade last at 1.3565. The pound tumbled in the run-up to a Bank of England decision last Thursday to keep rates on hold, and cuts to the central bank's economic growth and inflation projections for this year and next sent sterling even further lower. The BoE decision left traders sceptical about whether the central bank will hike rates at all this year. Market expectations of a rate hike in August are currently below 50 percent compared with nearly 60 percent at the start of last week amid worries about the health of the economy. On Tuesday data on the British labour market will keep traders busy and should offer some insight into whether inflation is feeding through to higher wage growth, a likely prerequisite to any BoE hikes.
USD/CAD is likely to find support at 1.2726 levels and is trading at1.2801 levels. It has made intraday high at 1.2799 and lows at 1.2749 levels. The Canadian dollar edged lower against the greenback on Monday as the greenback broadly rose and geo-political tensions kept investors away from market. The U.S. dollar initially dipped against basket of currencies but recovered as broad risk appetite returned and investors questioned whether a recent rally by the greenback had run out of steam. The price of oil, one of Canada's major exports, rose as OPEC reported that the global oil glut has been virtually eliminated. U.S. crude oil futures settled 0.4 percent higher at $70.96 a barrel. On Friday, the loonie reached a three-week high at C$1.2730 but was then pressured by domestic data showing a surprise April jobs decline. On the data front, Canadian home prices rose slightly in April but the rate of appreciation continued to decelerate amid softening sales and higher interest rates. The Teranet-National Bank Composite House Price Index, which measures changes for repeat sales of single-family homes, showed prices increased 0.2 percent on a monthly basis after a flat month in March. The Canadian dollar was last trading 0.1 percent lower at C$1.2805 to the greenback, or 78.09 U.S. cents. The currency traded in a range of C$1.2750 to C$1.2802.
USD/JPY is supported around 109.13 levels and currently trading at 109.62 levels. It peaked to hit session high at 109.68 and made session lows at 109.40 levels. The U.S. dollar strengthened against the yen on Monday as broad risk appetite returned and President Donald Trump's conciliatory remarks toward China's ZTE Corp, eased U.S.-China trade tensions. On Sunday, Trump vowed to help ZTE "get back into business, fast" nearly a month after the Commerce Department implemented a ban on U.S. companies selling to the company. Trump's reversal came as high-level trade talks between the world's two largest economies were due to resume this week after Washington's tough stance on trade and tariffs put the countries on track for a potential trade war. Growing trade tensions have worried investors, with concerns about a global trade war feeding into increased volatility in the market in recent months. Investors also pointed to improving sentiment about geopolitical tensions involving North Korea. U.S. Secretary of State Mike Pompeo said on Sunday that Washington would agree to lift sanctions on North Korea if the country agrees to dismantle its nuclear weapons program, a move that would create economic prosperity that "will rival" that of South Korea.
Equities Recap
Weak financial stocks weighed on European shares on Monday after a strong run of weekly gains, while dealmaking livened up trading with Portugal's EDP and Britain's IWG both jumping on takeover offers.
UK's benchmark FTSE 100 closed down by 0.18 percent, the pan-European FTSEurofirst 300 ended the day down by 0.06 percent, Germany's Dax ended up by 0.15 percent, France’s CAC finished the day down by 0.02 percent.
Wall Street ended a choppy session slightly higher on Monday as weakness in defensive stocks offset trade optimism following U.S. President Donald Trump's conciliatory remarks toward China's ZTE Corp, calming the waters amid U.S.-China trade tensions.
Dow Jones closed up by 0.29 percent, S&P 500 ended down by 0.09 percent, Nasdaq finished the day up by 0.12 percent.
Treasuries Recap
Treasury yields edged up on Monday, extending weekend gains as trade tensions eased a day after President Donald Trump pledged to help Chinese telecommunications company ZTE Corp, which has been penalized for violating U.S. sanctions with Iran.
The benchmark 10-year government yield remained range-bound, last at 2.993 percent, just below the 3 percent level it broke through more than two weeks ago for the first time since January 2014.
The spread between 5-year and 30-year Treasury yields was 27.2 basis points, roughly 1 basis point wider from late Friday. The gap had narrowed slightly below 26 basis points earlier Monday, which was the slimmest since July 2007.
Commodities Recap
Gold slipped on Monday as the U.S. dollar strengthened and precious metals prices remained within a tight range as investors awaited key U.S. data.
Spot gold lost 0.3 percent at $1,314.17 per ounce by 2:31 p.m. EDT (1831 GMT), erasing earlier gains after the U.S. dollar, in which it is priced, turned positive. U.S. gold futures for June settled down $2.50, or 0.2 percent, at $1,318.20 per ounce.
Oil prices rose on Monday as OPEC reported that the global oil glut has been virtually eliminated, while U.S. crude's discount to global benchmark Brent widened to more than $7, its deepest in five months.
Global benchmark Brent gained $1.11 to settle at $78.23 a barrel. West Texas Intermediate crude rose 26 cents to settle at $70.96.
WTI's discount to Brent was as much as $7.28, its widest since Dec. 12 on surging U.S. output.
