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Market Roundup: Sterling slumps below 1.3700 on weaker-than-expected manufacturing PMI, dollar index rallies as investors price in June rate hike, markets eye U.S. manufacturing PMI - Tuesday, May 1st, 2018

Market Roundup

  • EUR/USD -0.40%, USD/JPY 0.27%, GBP/USD -0.57%, EUR/GBP 0.16%
     
  • DXY 0.38%, DAX 0.25%, FTSE 0.32%, Brent -0.70%, Gold -0.41%
     
  • Divergence between growth and interest rate outlook spurred investors to chase dollar
     
  • Fed likely to keep rates steady; investors bet on June hike
     
  • Trump delays metal tariffs on Canada, EU, Mexico, exempts some others
     
  • Germany wants permanent U.S. tariffs exemption, deeper trade ties
     
  • Great Britain Apr Markit/CIPS Mfg PMI, 53.9, 54.8 forecast, 55.1 previous, 54.9 revised
     
  • Great Britain Mar BoE Consumer Credit, 0.25 bln, 1.45 bln forecast, 1.64 bln previous, 1.66 bln revised
     
  • Great Britain Mar Mortgage Lending, 3.96 bln, 3.60 bln forecast, 3.71 bln previous, 3.88 bln revised
     
  • Great Britain Mar Mortgage Approvals, 62.91k, 63k forecast, 63.91k previous, 63.78k revised

Economic Data Ahead

  • (0830 ET/1230 GMT) The Statistics Canada is expected to report that gross domestic product increased 0.3 percent in February, after having unexpectedly easing by 0.1 percent the month before.
     
  • (0830 ET/1230 GMT) The Markit will release Canada's Manufacturing PMI for the Month of April. The indicator stood at 55.7 in the prior month.
     
  • (0945 ET/1345 GMT) Financial firm Markit releases U.S. Manufacturing PMI for the month of April. The index is likely to show a final reading of 56.5 after posting similar gains in the previous month.
     
  • (1000 ET/1400 GMT) The Institute for Supply Management (ISM) is expected to report that U.S. manufacturing Purchasing Managers' index rose to 58.3 in April, down from 59.3 in March.
     
  • (1000 ET/1400 GMT) The Commerce Department is likely to report that U.S. construction spending increased 0.5 percent in March after rising 0.1 percent in the previous month.
     
  • (1530/1930) Autodata Corp is expected to report that U.S. auto sales figures dropped to an annualized rate of 17.22 million units in April from 17.48 million units in March.
     
  • (1630 ET/2030 GMT) API reports its weekly crude oil stock.
     

Key Events Ahead

  • N/A The U.S. Federal Reserve's Federal Open Market Committee commences its two-day monetary policy meeting.
     
  • (1445 ET/1845 GMT) Bank of Canada Governor Stephen Poloz will give a speech and press conference at the Yellowknife Chamber of Commerce.

FX Beat

DXY: The dollar index rose to a near 4-month peak as the Federal Reserve concludes its two-day meeting on Wednesday, where it is widely expected to stand pat on policy, while investors will be watching for hints of a rate hike in June. The greenback against a basket of currencies trades 0.4 percent up at 92.24, having touched a high of 92.24 earlier, its highest since Jan. 11. FxWirePro's Hourly Dollar Strength Index stood at 78.77 (Slightly Bullish) by 1000 GMT.

EUR/USD: The euro slumped to a fresh 3-1/2-month low as the greenback held firm near recent peaks amid holiday-thinned trading with major European markets closed for Labor Day. The European currency traded 0.4 percent down at 1.2034, having touched a low of 1.2027 earlier, its lowest since Jan. 12. FxWirePro's Hourly Euro Strength Index stood at -87.09 (Slightly Bearish) by 1000 GMT. Immediate resistance is located at 1.2140 (5-DMA), a break above targets 1.2210 (Apr. 26 Low). On the downside, support is seen at 1.202, a break below could drag it till 1.2000.

USD/JPY: The dollar rose to a near 3-month peak, boosted by the divergent monetary policy stance between the Fed and global central banks, as stronger U.S. economic growth prospects suggested a faster pace of Fed tightening in the months ahead. The major was trading 0.3 percent up at 109.63, having hit a high of 109.65 earlier, its highest since Feb. 8. FxWirePro's Hourly Yen Strength Index stood at -28.33 (Neutral) by 1000 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. manufacturing PMI's from both Markit and ISM. Immediate resistance is located at 109.75 (Feb. 1 High), a break above targets 110.28 (Feb. 2 High). On the downside, support is seen at 108.96 (Apr. 27 Low)), a break below could take it lower 108.54 (Apr. 24 Low).

GBP/USD: Sterling tumbled below the 1.3700 handle to a near 4-month low after survey data showed British manufacturing growth fell to a 17-month low, further reducing the prospects of a rate hike from the Bank of England when it meets next week. The major traded 0.5 percent down at 1.3685, having hit a low of 1.3665 earlier, it’s lowest since Jan. 12. FxWirePro's Hourly Sterling Strength Index stood at -69.38 (Bearish) by 1000 GMT. Immediate resistance is located at 1.3869 (5-DMA), a break above could take it near 1.3986 (10-DMA). On the downside, support is seen at 1.3655, a break below targets 1.3620. Against the euro, the pound was trading 0.3 percent down at 87.92 pence, having hit a low of 88.26 pence on Monday, it’s lowest since Mar. 16.

USD/CHF: The Swiss franc fell to a 4-1/2 month low as investors awaited the Federal Reserve's policy decision and crucial U.S. employment data due later in the week for fresh cues on the strength of the U.S. economy. The major trades 0.3 percent up at 0.9933, having touched a high of 0.9939 earlier, it’s highest since Dec. 12. FxWirePro's Hourly Swiss Franc Strength Index stood at 48.00 (Neutral) by 1000 GMT. On the higher side, near-term resistance is around 0.9977 (Dec. 8 High) and any break above will take the pair to next level till 1.0000. The near-term support is around 0.9859 (5-DMA) and any close below that level will drag it till 0.9788 (10-DMA).

Equities Recap

European shares consolidated amid holiday-thinned trading, while the greenback rose to a 4-month peak ahead of the U.S. Federal Reserve's policy decision.

The pan-European STOXX 600 index surged 0.05 percent at 385.39 points, while the FTSEurofirst 300 index climbed 0.05 percent to 1,512.43 points.

Britain's FTSE 100 trades 0.3 percent up at 7,530.99 points, while mid-cap FTSE 250 gained 0.5 percent to 20,378.78 points.

Major markets in Europe and Latin America will be closed on account of Labour Day.

Commodities Recap

Crude oil prices declined as the dollar remained near a four-month high, while concerns that U.S. President Donald Trump may pull out of the Iran nuclear deal limited the downside. International benchmark Brent crude was trading 0.9 percent down at $74.02 per barrel by 0917 GMT, having hit a high of $75.59 on Monday, its highest since Nov. 2014. U.S. West Texas Intermediate was trading 0.9 percent down at $67.88 a barrel, after rising as high as $69.53 in mid-April, its highest since Nov. 2014.

Gold prices slumped to a 6-week low as the dollar firmed near 3-1/2-month highs, while investors awaited the Federal Reserve's policy outcome for clues on the near-term outlook. Spot gold was down 0.5 percent at $1,309.12 per ounce at 0922 GMT, having eased to $1,310.09 on Monday, their lowest since March 21. U.S. gold futures for June delivery declined 0.5 percent to $1,313.10 per ounce.

Treasuries Recap

The U.S Treasuries lost motion ahead of the country’s ISM manufacturing Purchasing Managers’ Index (PMI) for the month of April, scheduled to be released today by 12:30GMT amid an otherwise, silent trading session. The yield on the benchmark 10-year Treasuries jumped nearly 2 basis points to 2.95 percent, the super-long 30-year bond yields also climbed 2-1/2 basis points to 3.12 percent and the yield on the short-term 2-year traded tad higher at 2.49 percent.

The UK gilts remained mixed during European session after the country’s manufacturing PMI for the month of April missed market expectations and now, investors will remain focused on the construction PMI, scheduled to be released on May 2 by 14:00GMT for further direction in the debt market. The yield on the benchmark 10-year gilts, slid nearly 1 basis point to 1.41 percent, the super-long 30-year bond yields remained tad higher at 1.83 percent and the yield on the short-term 2-year traded flat at 0.77 percent.

The New Zealand government bonds closed session on a mixed note as investors awaited first quarter employment report and GlobalDairyTrade price auction ahead of the next week’s RBNZ monetary policy decision. At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, fell 1 basis point to 2.82 percent, the yield on the long-term 20-year note also dipped 1 basis point to 3.75 percent and the yield on short-term 2-year closed 2 basis points higher.

The Japanese 10-year government bond yield touched a 2-week low during late Asian session as investors are glued to tracking the Bank of Japan’s (BoJ) dovish tone in the latest monetary policy statement released last Friday amid a dearth of economically significant data throughout this week. Further, the BoJ has kept the purchase of government bonds unchanged at its daily market operations today. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped nearly 2 basis point to 0.03 percent, the yield on the long-term 30-year note plunged nearly 2-1/2 basis points to 0.72 percent and the yield on short-term 2-year traded nearly 1 basis point lower at -0.13 percent by 04:55.

The Australian government bonds gained as a fresh wave of buying pressured the U.S. 10-year Treasury note rate to under 3 percent mark. Markets will now eye the Reserve Bank of Australia (RBA) monetary policy decision of next week, where it is widely expected do nothing. The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 4-1/2 basis points to 2.836 percent, the yield on the long-term 30-year Note also dipped 5 basis points to 3.390 percent and the yield on short-term 2-year down 2 basis points to 2.107 percent.

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