Market Roundup
• US Initial jobless claims 236k v 245k forecast, 238k –previous.
• US Jobless claims 4-wk Avg 243.5k, 243k - previous.
• US PPI final demand YY 2.5% v 2.2% forecast, 2.3% - previous.
• US PPI final demand MM 0.5% v 0.2% forecast, -0.1% - previous.
• Fed's Dudley: some time later this year or next year we will gradually reduce assets that we reinvest.
• ECB'S Constancio: loose for longer is less risky than premature withdrawal of stimulus.
• BoE'S Carney: volatility is quite low in financial markets but closer to historic averages in sterling markets.
• BoE holds rate steady vote 7-1 as expected (put in after US data)
• BoE: Market int rate assumption shows 1st rate hike fully priced in for Q4 '19 (was Q1 '19 in Feb).
• US Senate votes to advance the nomination of Robert Lighthizer to be US trade representative; final vote still needed.
• US House Ways and Means committee sets May 18 hearing on tax reform and economic growth –statement.
• Acting FBI director Mccabe: confident that files related to the Russia investigation are secure
Looking Ahead - Economic Data (GMT)
• 22:30 New Zealand Manufacturing PMI 57.8 - previous
• 02:00 China TR IPSOS PCSI 66.40 – previous
• 02:00 Australia TR IPSOS PCSI 51 – previous
• 02:00 Japan TR IPSOS PCSI 40.80 - previous
Looking Ahead - Events, Other Releases (GMT)
• 04:15 Japan BOJ board member Yutaka Harada speaks at Hitotsubashi University seminar
Currency Summaries
EUR/USD is likely to find support at 1.0830 levels and currently trading at 1.0865 levels. The pair has made session high at 1.0873 and hit lows at 1.0850 levels. The euro inched slightly higher against the dollar on Thursday as dollar paused its recent rally as investors were hesitant to make big bets amid concerns after U.S. President Donald Trump unexpectedly dismissed the Federal Bureau of Investigation chief James Comey. Still, the outlook for the greenback is bright, especially after upbeat U.S. data on Thursday solidified expectations of an interest-rate hike by the Federal Reserve next month. Data showed U.S. initial jobless claims unexpectedly fell last week, while producer prices rebounded strongly in April. Following the report, interest rate futures priced in a more than 80 percent probability that the Fed will tighten policy again next month. Initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 236,000 for the week ended May 6, the Labor Department said on Thursday, confounding economists' expectations for a rise to 245,000. In a second report on Thursday, the Labor Department said its producer price index for final demand increased 0.5 percent last month after slipping 0.1 percent in March.
GBP/USD is supported in the range of 1.2842 levels and currently trading at 1.2891 levels. It reached session high at 1.2893 and dropped to session low at 1.2850 levels. British pound declined sharply against the dollar on Thursday as sterling was weighed down after the Bank of England's inflation report showed interest rates were unlikely to in the near future. Bank of England policymakers concluded a two-day meeting and projected a very different outlook for the UK. BOE kept rates unchanged and indicated in a quarterly inflation report that interest rates were unlikely to rise until late 2019. The BoE's Monetary Policy Committee (MPC) voted 7-1 in favour of keeping interest rates on hold at their record-low 0.25 percent this month, quashing some bets that a second official would also support a rise. On the data front, British industrial output shrank for the third month in a row in March, official data showed on Thursday, underscoring how the impact of last year's Brexit vote has begun to weigh on the economy. Industrial output fell by a monthly 0.5 percent a sharper decline than expected by economists and output in February was revised lower. Sterling fell more than half a percent to a one-week low around $1.2847, before recovering to trade at $1.2892 in the late US session.
USD/CAD is supported at 1.3645 levels and is trading at 1.3688 levels. It has made session high at 1.3749 and lows at 1.3677 levels. The Canadian dollar strengthened against its U.S. counterpart on Thursday as prices of oil climbed and the U.S. dollar weakened on geo political concern. The U.S. currency has struggled to gain traction after President Donald Trump unexpectedly fired FBI director James Comey on Tuesday, fueling expectations of delays in the implementation of the government's economic agenda. Oil prices rose more than 1 percent, extending Wednesday's 3 percent gains on the back of the biggest one-week drop in U.S. inventories so far this year and the decision by Iraq and Algeria to join Saudi Arabia in supporting an extension to supply cuts by the Organization of the Petroleum Exporting Countries. Meanwhile, Moody's Investor Service on Wednesday downgraded the long-term ratings for six Canadian banks, pointing to rising domestic consumer debt and the country's elevated housing prices that leave lenders more vulnerable to a slowdown in the Canadian economy. The Canadian dollar was trading at C$1.3694 to the greenback. The currency traded in a range of C$1.3677 to C$1.3770.
NZD/USD is supported around 0.6810 levels and currently trading at 0.6853 levels. It hit session high at 0.6860 and made session lows at 0.6830 levels. New Zealand dollar declined to hit 11 months low against US dollar on Thursday after the Reserve Bank of New Zealand (RBNZ) wrong-footed Kiwi bulls by keeping a neutral bias at its policy review where it held interest rates steady at a record low 1.75 percent. The Reserve Bank of New Zealand (RBNZ) defied market expectations it would adopt a more hawkish tone at its policy meeting on Thursday, retaining instead its neutral stance and sending the country's currency to an 11-month low. The monetary policy statement accompanying the RBNZ's decision to keep its benchmark interest rate steady was the clearest sign yet of the divergence between the central bank and the market on the inflation outlook. It maintained an unchanged official cash rate (OCR) projection that implies the next move will be a tightening in late 2019, surprising economists who had expected that timeline to shift forward to the first half of 2019. The New Zealand dollar dropped 1.5 percent to $0.6830, having gone as far as $0.6818, lowest since June last year. A break under $0.6810 would target a retracement to the one-year trough of $0.6676.
Equities Recap
European shares pulled back on Thursday with Spanish blue chips suffering their biggest one-day loss in six months, weighed down by losses among banks, while Italian lender UniCredit shone after solid results.
UK's benchmark FTSE 100 closed down flat, the pan-European FTSEurofirst 300 ended the day down by 0.46 percent, Germany's Dax ended down by 0.4 percent, France’s CAC finished the day down by 0.4 percent.
U.S. stocks fell on Thursday after worse-than-expected sales drop at Macy's and Kohl's sparked a selloff in shares of department stores and stirred fears that consumers are not spending enough to drive strong economic growth.
Dow Jones closed down by 0.10 percent, S&P 500 ended down 0.21 percent, Nasdaq finished the day down by 0.21 percent.
Treasuries Recap
U.S. Treasury yields were little changed for a second day on Thursday after hitting their highest levels since March as losses in Wall Street stocks offset an April jump in producer prices and a poorly received 30-year bond auction.
In tight, choppy trading, benchmark 10-year Treasury yield was down 1 basis point at 2.408 percent, retreating from 2.423 percent, a near six-week peak reached following the April PPI report.
The two-year Treasury yield, which is sensitive to traders' view on Fed policy, hit a near eight-week peak at 1.367 percent before subsiding to 1.347 percent, down 1 basis point on the day.
Commodities Recap
Gold rose on Thursday as U.S. and European stock markets retreated, though it pared gains after data showing a tightening jobs market and accelerating inflation briefly lifted the dollar and pulled U.S. bond yields from earlier lows.
Spot gold was up 0.4 percent at $1,223.6 by 1:52 p.m. EDT (1752 GMT), following eight sessions in which prices have been flat or fallen. Earlier it climbed as high as $1,227.70. U.S. gold futures settled up 0.4 percent at $1,224.20.
Oil prices rose for a second day on Thursday, closing more than 1 percent higher as support grew for OPEC output cuts a day after the U.S. government reported a big draw in crude inventories, boosting confidence that a global glut might diminish.
U.S. light crude oil ended the day up 50 cents, or 1.6 percent, at $47.83. Brent settled at $50.77, up 55 cents or 1.1 percent. It was the highest closing price in a week for both benchmarks.
