Market Roundup
- USD/JPY +0.7%, EUR/USD -0.14%, GBP/USD -0.02%
- DXY +0.14%, DAX +0.4%, Brent +0.65%, Iron -3.37%
- Germany Apr W/sale Px Idx -2.7% y/y vs -2.6% previous
- EZ Mar Ind. Prod. +0.2% y/y vs +0.8% previous, 1.1% exp
- Norgesbank unchanged at 0.5% as expected
- Norway Q1 GDP 1.0% vs revised -1.3% Q4, +0.1% exp
- Sweden Apr CPIF 1.4%, below market but matched Riksbank estimate
- BoJ Gov Kuroda: don't see any chance now of return to Lehman Bros type shock
- BoJ Gov Kuroda: oil prices showing signs of bottoming out
- Kuroda: expect gradual rise in oil prices to push up consumer prices in future
- BoJ Kuroda: Hard for Japan to weaken yen to boost exports
- PM Abe's aide Ito: BoJ likely to ease either in June or July with eye on Q1 GDP
- BoJ Apr meet- One member-Shouldn't hesitate taking additional easing if needed
- BoJ Kuroda: big swings in fx moves that don't reflect fundamentals undesirable
Economic Data Preview
- (0830 ET/1230 GMT) The number of Americans filing for unemployment benefits are expected to have declined, which would further ease concerns about the labor market's health in the wake of a slowdown in job gains in April. According to a Reuters survey of economists, initial claims for unemployment benefits are likely to have decreased 4,000 to a seasonally adjusted 270,000 for the week ended May 7.
- (0830 ET/1230 GMT) The U.S. Department of Labor is expected to report that import and export prices for April gained 0.5 percent and 0.1 percent, respectively. In March, import prices rose 0.2 percent, while export prices remained flat.
- (0830 ET/1230 GMT) The Statistics Canada is likely to report that new home prices in March increased by 0.1 percent, after having risen 0.2 percent in February.
- (0900 ET/1300 GMT) Mexico's industrial output is likely to have risen 0.05 percent in March. Production declined less than expected in February as construction contracted sharply, however, factory production grew.
- (1030 ET/1430 GMT) The Energy Information Administration reports its Natural Gas Storage for the week ending May 6.
Key Events Ahead
- (1100 ET/1500 GMT) The Federal Reserve Bank of Cleveland posts the text of President Loretta Mester's remarks before the Konstanz Seminar on Monetary Theory and Monetary Policy in Insel Reichenau, Germany.
- (1145 ET/1545 GMT) Federal Reserve Bank of Boston President Eric Rosengren is expected to give clues on timing of the next hike when he speaks before a luncheon hosted by the Greater Concord Chamber in Concord, New Hampshire.
- (1415 ET/1815 GMT) Kansas City Federal Reserve President Esther George will speak on the U.S. economy before the Federal Reserve Bank of Kansas City Business and Community Leaders Luncheon, she could give clues over how firmly she will push for further hikes.
- (1430 ET/1830 GMT) FedTrade Operation 30-year Ginnie Mae max $1.3 bln.
FX Beat
USD: The dollar index, against a basket of currencies trades 0.3 higher at 94.111, recovering from a low of 93.684 struck in the previous session.
EUR/USD: The euro weakened 0.3 percent to 1.1386, after eurozone posted worse than expected industrial production figures. Eurzone's industrial production s.a. for the month of March stood at -0.8 percent against market consensus of 0.0 percent. Industrial production w.d.a on yearly basis was at 0.2 percent versus pervious 0.8 percent rise and market expectations of 1.1 percent. The short term trend is slightly weak as long as resistance 1.1455 holds. On the higher side any break above 1.1455 will take the pair to next level till 1.1500/1.1530 level. The minor support is around 1.1350 and break below will target 1.1270/1.1200.The minor support is around 1.13800. Overall bearish invalidation above 1.16200 level.
USD/JPY: The Japanese yen declined as investors sold the currency amid speculation that the Bank of Japan could decide to expand its monetary stimulus as soon as next month. The greenback rose 0.8 percent to 109.29 yen, recovering from a 18-month low of 105.55 yen on May 3. Minor weakness can be seen only below 108 level. Any break below 108 will drag the pair down till 107.45 (Tenken-Sen)/106.99 (61.8% retracement of 105.54 and 109.36). On the higher side major intraday resistance is around 108.81 and any indicative break above targets 109.50 (61.8% retracement of 111.88 and 105.54). The pair should break above 109.50 for further upside till 110/110.72.
GBP/USD: Sterling rose against the dollar and euro after the Bank of England left the interest rate unchanged at 0.5 percent, in line with market expectations. BoE's policymakers said that if UK voted to leave EU then sterling is likely to depreciate sharply, while asset prices might fall and unemployment rise. Sterling trades 0.2 percent higher at 1.4482, having touched sessions high of 1.4497 following BoE's decision. Against the euro, it rose to 78.59 to trade at 78.74 pence. The short term trend is still bearish as long as resistance 1.4550 holds.The immediate resistance is around 1.4550 and break above targets 1.4600/1.4625-30 level. Any break below 1.4400 will drag the pair down till 1.4360 (200 day 4HMA)/1.4296 (55 DMA)/1.4240 level.
USD/CHF: The Swiss franc trades higher at 0.9706 against the U.S. dollar, having touched a high of 0.9681 earlier in the session. It made a low of 0.9725, before climbing up to its current levels. The short term trend is slightly bullish as long as support 0.9680 holds. On the higher side any break above 0.9760 will take the pair to next level till 0.9800/0.9850. The short term trend is reversal only above 0.9800. Any violation below 0.9680 will drag the pair down till 0.9630/0.9575.
AUD/USD: The Australian dollar declined 0.6 percent to 0.7327, pulling closer to a 2-month trough of 73 cents touched on Tuesday. The Aussie made an early high of 0.7379, before declining to its current levels. The short term trend is slightly bearish as long as resistance 0.7410 (4 H Kijun-Sen) holds. On the higher side major resistance is around 0.7410 and break above targets 0.7480/0.7520.The minor resistance is around 0.7350/0.7380. The major support is around 0.7300 and break below will drag the pair till 0.7256/0.7200.
NZD/USD: The New Zealand dollar trades flat at 0.6814, having touched a high of 0.6836 earlier in the session and away from a low of 0.6717 touched on Tuesday. The Kiwi was strengthened after the central bank refrained from announcing any specific measures to curb the housing market. Immediate resistance is located at 0.6854 (Previous Session Low), while support is seen at 0.6797 (5-DMA).
Equities Recap
European shares were led lower by financial shares, struck by sharp falls on Wall Street the previous day.
The pan-European FTSEurofirst stocks index declined 0.5 percent, Germany's DAX index fell by 0.4 percent, France's CAC dropped 0.6 pct while Britain's FTSE 100 lost 0.5 percent.
Tokyo's Nikkei gained 0.41 pct at 16,646.34, Australia's S&P/ASX 200 index slumped 0.40 pct at 5,350.90 points. MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.5 percent, moving back toward a 2-month low touched on Tuesday.
Shanghai Composite index closed flat at 2,835.86 points, while CSI300 index edged up 0.2 pct at 3,090.14 points. HK’s Hang Seng index ended down 0.7 pct at 19,915.46 points.
Commodities Recap
Oil prices rose towards 6-month highs, facilitated by data from the International Energy Agency that showed tightening supply in addition to a surprise drop in U.S. crude inventories.
Brent crude futures were trading at $47.96 per barrel at 1054 GMT, near a 6-month high of $48.26 hit at the end of April. West Texas Intermediate U.S. crude futures were 39 cents higher at $46.62.
Gold retreated after rising the most as the dollar recovered some lost ground. Spot gold was down 0.7 percent at $1,266.86 an ounce by 1057 GMT, after climbing off 2-week lows overnight. U.S. gold for June delivery dropped 0.2 percent to $1,273.20 an ounce.
Treasuries Recap
U.S. government bond prices weakened as jump in oil prices led investors to favour riskier assets like stocks and oil. The yield on the benchmark 10-year bonds rose 2bps to 1.746 pct by 1025 GMT. Ahead of the flurry of data coming at the end of the week, markets now await for 30-Year bond auctions on Thursday and will also look ahead to a lighter flow of data this week, highlighted by retail sales, producer prices, business inventories and University of Michigan consumer sentiment releases on Friday.
The European bonds slumped as investors cooled on safe-haven assets amid gains in riskier assets including stocks and oil. Also, investors await Bank of England (BoE) interest decision and Governor Mark Carney is expected to tread carefully in its speech on whether to leave the European Union, when he sets out the central bank's latest forecasts against the most uncertain economic backdrop in years. The benchmark German 10-year bonds yield rose 2bps to 0.151 pct, French 10-year bunds yield climbed 4bps to 0.510 pct, Italian equivalents jumped 5bps to 1.509 pct, Spanish 10-year bonds yield inched higher 4bps to 1.631 pct and Portuguese 10-year bonds yield rose 3bps to 3.275 pct, Netherlands 10-year bonds yield moved up 3bps to 0.373 pct, British 10-year bonds yield rose 3bps to 1.414 pct by 0940 GMT.
The German 10-year bund yields recovered from 1-months low amid following gains in crude oil prices. In early session today, the European benchmark fell 2 bps, dipped below 0.1 pct for the first time since April. Meanwhile, the yield on the benchmark 10-year bonds rose 1bp to 0.130 pct by 0900 GMT.
The Japanese government bonds were trading nearly flat as investors receive no more important data or events. Moreover, the results of today's monthly JPY800 billion 30-years JGB re-opening auction were weaker than widely expected and further bond prices are likely to be ruled by the movements in the crude oil market. The yield on the benchmark 10-year bonds, which moves inversely to its price stood unchanged at -0.095 pct and the yield on the 2-year bonds remained steady at -0.241 pct by 0600 GMT.
U.K Gilts continue to trade lower as Bank of England (BOE) paints a hawkish picture despite Brexit risk in its inflation report after leaving the policy rate unchanged at 0.50 pct. Also, rallying crude oil prices drove-out investors from safe-haven assets. The yield on the benchmark 10-year bonds rose 3bps to 1.419 pct by 1135 GMT.
The Australian bond plunged as investors shifted to riskier assets including stocks and oil. The yield on the benchmark 10-year Treasury note rose 2bps to 2.312 pct by 1015 GMT.
