Market Roundup
- Moody's cuts China's rating to A1 from AA3; outlook stable from negative
- Moody's: No timetable for re-assessment of rating after downgrade
- China finmin: Downgrade overestimates difficulties, underestimates ability to reform
- China finmin: Expects economy to maintain stable, relatively fast growth
- Ex-FOMC Chair Bernanke: BoJ correct in pursuing 2% CPI target, policy correct
- Reuters Tankan May mfg index +24, non-mfg +30, April +26/+28, Aug +24/+22 eyed
- BoJ Gov Kuroda: Natural rate of interest uncertainty clouding policy outlook
- U.S. rate hike in June 'a distinct possibility' - Fed's Harker
- Fed could intervene in bond run-off as needed - Harker
Economic Data Ahead
- (0200 ET/0600 GMT) Germany Jun GfK Consumer Sentiment, 10.2 eyed; last 10.2
- (0200 ET/0600 GMT) Norway Mar Labour Force Survey, 4.3% eyed; last 4.3%
- (0315 ET/0715 GMT) Switzerland Q1 Industrial Orders y/y, last -3.3%
- (0500 ET/0900 GMT) Italy Apr Flash Trade Balance Non-EU, last 4.14 bln
Key Events Ahead
- (0330 ET/0730 GMT) Riksbank to publish Financial Stability Report
- (0500 ET/0900 GMT) Riksbank will hold a press conference on financial stability
- (0945 ET/1345 GMT) ECB's Mario Draghi speaks at First Conference on Financial Stability
- (1700 ET/2100 GMT) ECB to publish Financial Stability Report
- (0630 ET/1030 GMT) Germany 10Y 3.000 bln auction
FX Beat
DXY: The dollar rebounded across the board following a rise in U.S. Treasury yields. The greenback against a basket of currencies traded 0.1 percent up at 97.41, retreating from a low of 96.80 hit on Monday, it’s lowest since Nov. 9. FxWirePro's Hourly Dollar Strength Index stood at 117.70 (Highly Bullish) by 0400 GMT.
EUR/USD: The euro steadied after rising to a 6-1/2 month high in the previous session as investors awaited European Central Bank President Draghi’s speech for next direction. The European currency traded flat 1.1181, having touched a high of 1.1267 on Tuesday, its highest since Nov. 9. FxWirePro's Hourly Euro Strength Index stood at 6.49 (Neutral) by 0400 GMT. Investors’ attention will remain on ECB Draghi's speech, ahead of the U.S. housing price index, existing home sales and FOMC officials’ speech. Immediate resistance is located at 1.1267 (Previous Session High), a break above targets 1.1300. On the downside, support is seen at 1.1105 (61.8% retracement of 1.0839 and 1.1267), a break below could drag it near 1.1055 (50.0% retrace)/1.1000.
USD/JPY: The dollar rose to a fresh 1-week high as the greenback rebounded from 6-1/2-month lows against its major peers strengthened by a rise in U.S. Treasury yields. The major traded 0.1 percent up at 111.89, having touched a high of 111.99 earlier, its highest since May 17. FxWirePro's Hourly Yen Strength Index stood at -109.60 (Highly Bearish) by 0400 GMT. Investors’ will continue to track sentiment around the U.S. Treasuries, ahead of the U.S. housing price index, existing home sales and FOMC officials’ speech. Immediate resistance is located at 112.32 (21-DMA), a break above targets 113.00. On the downside, support is seen at 111.61 (78.6% retracement of 110.23 and 111.99), a break below could take it near 111.32 (61.8% retrace).
GBP/USD: Sterling edged up after easing in the previous session, as the traders reacted to the UK PM May’s comments on the terror attack. Moreover, the upside was limited as a renewed risk-aversion wave gripped the market sentiment, after Moody’s cut China credit ratings, with outlook to stable from negative. Sterling trades 0.1 percent up at 1.2974, having hit a high of 1.3047 last week, its strongest since Sept. 29. FxWirePro's Hourly Sterling Strength Index stood at -18.34 (Neutral) by 0400 GMT. Investors’ attention will remain on U.S fundamental drivers, amid a lack of data from the UK docket. Immediate resistance is located at 1.3047 (May 18 High), a break above could take it over 1.3050. On the downside, support is seen at 1.2925 (21-DMA), a break below targets 1.2900. Against the euro, the pound traded 0.1 percent up at 86.15 pence, having hit a 1-1/2 month low of 86.74 the day before.
AUD/USD: The Australian dollar declined on news that rating agency Moody’s downgraded China’s long-term local currency and foreign currency issuer ratings to A1 from Aa3 and changed the outlook to stable from negative. On Tuesday, the major rose to a 3-week high as the crude oil prices rallied to multi-week highs on increasing OPEC-led production cut expectations. The Aussie trades 0.4 percent down at 0.7443, having hit a high of 0.7517 the day before, it’s strongest since May. 3. FxWirePro's Hourly Aussie Strength Index stood at -152.01 (Highly Bearish) by 0400 GMT. Investors will continue to digest China's rating news, ahead of the U.S economic releases. Immediate support is seen at 0.7444 (61.8% retracement of 0.7328 and 0.7517), a break below targets 0.7422 (50.0% retrace). On the upside, resistance is located at 0.7517 (Previous Session High), a break above could take it near 0.7550.
NZD/USD: The New Zealand dollar eased, retreating from a 4-week high touched in the previous session following a downgrade in China's sovereign ratings. However, the downside was limited as New Zealand posted a trade surplus of NZ$578 million ($405 million) in April, the largest monthly figure since 2015 boosted by dairy, wood and wine exports. The Kiwi trades 0.2 percent down at 0.6993, hovering away from a high of 0.7046 touched on Tuesday, its strongest since Apr. 24. FxWirePro's Hourly Kiwi Strength Index was at 37.96 (Neutral) by 0400 GMT. Investors’ will continue to track broad based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7046 (Previous Session High), a break above could take it near 0.7052 (Apr 19 High). On the downside, support is seen at 0.6958 (61.8% retracements of 0.6817 and 0.7046), a break below could drag it till 0.6931 (50.0% retrace).
Equities Recap
Asian stocks tumbled despite modest gains on Wall Street overnight, as investors’ appetite for risky assets weakened after Moody cut its sovereign credit rating on China.
MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.2 percent.
Tokyo's Nikkei rose 0.5 percent to 19,708.51 points, Australia's S&P/ASX 200 index gained 0.1 percent to 5,764.20 points and South Korea's KOSPI added 0.1 percent to 2,314.86 points.
Shanghai composite index fell 0.5 percent to 3,046.55 points, while CSI300 index was trading 0.5 percent down at 3,405.58 points.
Hong Kong’s Hang Seng was trading 0.1 percent lower at 25,380.54 points. Taiwan shares added 0.4 percent to 10,045.37 points.
Commodities Recap
Crude oil prices rose, having touched a high a 1-month high in the previous session, supported by increasing expectations that an OPEC-led production cut aimed at tightening the market would be extended through the first quarter of next year. International benchmark Brent crude was trading 0.1 percent up at $54.21 per barrel by 0408 GMT, having hit a high of $54.39 the day before, its strongest since Apr. 19. U.S. West Texas Intermediate gained 0.1 percent to $51.51 a barrel, after rising as high as $51.76 on Tuesday, its highest since Apr. 19.
Gold prices steadied after declining in the previous session as the U.S. dollar rebounded from 6-1/2-month lows and investors shrugged off heightened political risk. Spot gold was about 0.1 percent higher at $1,252.10 an ounce by 0412 GMT, having touched a near 3-week high on Thursday. U.S. gold futures settled 0.5 percent lower at $1,255.50 an ounce.
Treasuries Recap
The 10-year U.S treasury yield stood at 2.276 percent lower by 0.007 bps, while 5-year yield was 0.005 bps down at 1.8250 percent.
The Australian bonds plunged tracking weakness in the United States counterpart after a solid supply at the 2-year debt auction held late yesterday. The yield on the benchmark 10-year Treasury note jumped nearly 4 basis points to 2.49 percent, the yield on the 15-year note climbed 3-1/2 basis points to 2.91 percent and the yield on short-term 2-year traded nearly 1 basis point higher at 1.62 percent.
The Canadian government bond prices were mixed across the yield curve with longer term bond prices falling as the market reopened following the Victoria Day holiday on Monday. The two-year price was down 5.5 Canadian cents to yield 0.703 percent, and the 10-year fell 38 Canadian cents to yield 1.513 percent.
