Europe Round Up: UK conservatives sweep back in to power; US NFP in Focus– May 8 th, 2015

Market Roundup

• GBP soars on UK election outcome. GBP/USD 2+ mth high at 1.5523.
  
  
• EUR/GBP hit lows of 0.7225, lowest since Apr 30.
  
  
• Conservatives set for majority suggest exit polls.
  
  
• UK Labour leader Ed Miliband to resign after losing election.
  
  
• UK FinMin: Bringing UK together is now one of biggest tasks we face.
  
  
• YouGov poll 57% of Scots would vote to stay in EU, 23% votes to leave.
  
  
• Greek prime minister optimistic of EU deal "soon".
  
  
• Euro zone's position on Greek debt has not changed.
  
  
• UK Apr Halifax House prices 1.6% m/m v prev 0.6% rvsd. 0.4% exp.
  
  
• UK Mar Goods trade bal (non EU) -3.163bln vs prev -3.258bln rvsd. -2.95bln exp.
  
  
• UK Mar Goods trade balance -10.122bln vs prev -10.79bln. -9.80bln exp.
  
  
• Italy Econmin, EU, Greece making progress, now have to accelerate.
  
  
• Switzerland Apr CPI -0.2% m/m, -1.1% y/y vs prev 0.3%/-0.9%. 0.1%/-0.9% exp.
  
  
• Japan ruling party chief: BOJ does not need to ease monetary policy further for time being.
  
  
• Japan ruling party cjief: Must be mindful of negative effects of weak yen on small firms.
  
  
• China CB economy faces downward pressure in short-term.

Economic Data Ahead

• (0830 EDT/1230 GMT) US Nonfarm Payrolls (Apr) mkt 224k, previous +126k.
  
  
• (0830 EDT/1230 GMT) US Private Payrolls (Apr) mkt 220k, previous +129k.
  
  
• (0830 EDT/1230 GMT) US Manufacturing Payrolls (Apr) mkt +5k, previous -1k.
  
  
• (0830 EDT/1230 GMT) US Unemployment Rate (Apr) mkt 5.4%, previous 5.5%.
  
  
• (0830 EDT/1230 GMT) US Average Hourly Earnings (Apr) mkt +0.2% m/m, previous +0.3% m/m.
  
  
• (0830 EDT/1230 GMT) US Average Workweek (Apr) mkt 34.5, previous 34.5 hours.
  
  
• (1000 EDT/1400 GMT) US Wholesale Inventories (Mar) mkt +0.3% m/m, previous +0.3% m/m.
  
  
• (1000 EDT/1400 GMT) US Wholesale Sales (Mar) mkt +0.5% m/m, previous -0.2% m/m.

Key Events Ahead

• (1145 EDT/1545 GMT) Fed Trade Operation 30-yr Fannie Mae/Freddie Mac (max $1.950 bln).

FX Recap

EUR/USD is trading at 1.1222 levels and made high of 1.1256 so far. Pair broke major support levels of 1.290 and made low of 1.1181. In European session German and Italy Industrial production data released. German data was negative while Italy came with positive numbers. Neutral momentum studies, 20 day Bollinger's, 5, 10 & 20 dma's head north. Initial support/resistance is seen at 1.1158 and 1.1280 levels. Option expiries are at 1.1100 (696M), 1.1200 (1.96BLN), 1.1295-1.1300 (793M).

USD/JPY turns up side and currently trading above 120 levels and made high of 120.08. The Japanese yen weakened marginally after April central bank board meeting minutes offered no surprises on views. The Bank of Japan board sees the output gap improving, but also concern about the ability to hit a target of 2% sustained inflation in the coming year. Initial support is seen at 119.05 and 118.49. Resistance is seen at 120.69 levels. Option expiries are at 119.00 (1.3BLN), 120.00 (1.2BLN), 120.25 (585M), 120.50 (1BLN), 120.80 (864M), 121.25 (478M).

GBP/USD took reverse turn and currently trading at 1.5414 levels and made a high of 1.5522 in European session only. It has recovered till 1.5520 after Conservative party is set to win 316 seats in the total 650 seats. UK released Halifax HPI with positive numbers as well as trade balance data with negative numbers. Technically GBP/USD major resistance is seen around 1.5525 and any break will target 1.5640/1.5745 in short term. Support is seen at 1.5372 levels.

USD/CHF touched the low at 0.9070 levels yesterday and currently trading Upside at 0.9239 levels. Today Switzerland released Unemployment rate and CPI numbers which came with Negative surprise. Near term support is seen at 0.9055 levels and resistance is seen at 0.9221 levels. A daily close above 0.9221 level lead the pair towards 0.9262, 0.9281 levels.

AUD/USD is trading at 0.7912 and made intraday low at 0.7862 levels. The Australian dollar fell as the central bank cut its outlook for inflation and growth, suggesting there may be further room to ease the cash rate from a record low 2% and trade data from China was downbeat. China's April trade data showed exports fell 6.2% in April year-on-year and imports slumped 16.1% with a trade surplus of $34.13 billion. Initial support is seen at 0.7862, today's low and resistance at 0.7976, 0.8010 levels. Option expiries are at 0.7800 (592M), 0.7875 (205M), 0.7900 (205M), 0.7925 (343M).