Market Roundup
- Japan April Services Sector PMI Falls to 48.9, Lowest in 2 Yrs (49.9 in March).
- China state planner orders 38 illegal coal projects to close immediately.
- China state planner says will take stronger action against illegal coal mining.
- RBA quarterly statement: policy easing based on lower inflation outlook, cooling in housing.
- RBA cuts inflation forecasts, GDP forecasts mostly unchanged yr average for 2016 revised up 0.5 ppt.
- RBA - underlying inflation seen at 1-2% end 2016 (previous 2-3%), 1.5-2.5% out to mid-2018 (previous 2-3%).
- RBA - GDP seen at 2.5-3.5% end 2016 out to end 2017, 3-4% to mid-2018.
- RBA - CPI data showed broad-based weakness in domestic cost pressures, slow growth in labour costs.
- RBA - outlook for wage growth revised lower, to stay low for longer and then rise very gradually.
- RBA also cites retail competition, softer inflation in rental & home building, falling fuel & utility costs.
- RBA - inflation expectations in Australia below average, but have not declined as much as elsewhere.
- RBA says outlook for domestic cost pressures, impact of a$ on inflation are key uncertainties.
- RBA - Unemployment seen around current rate to mid-‘17, before declining gradually.
- RBA - Q1 GDP growth seen around same moderate pace as previous quarter.
- RBA - household consumption to be a bit above average, net exports will continue to add to GDP.
- RBA outlook assumes recent rises in bulk commodity prices are not sustained, LNG prices seen higher.
- RBA - most of decline in mining investment to be over by end 2016, non-mining still subdued.
- RBA - outlook for growth in major trading partners revised a little lower.
- PBOC sets Yuan Mid-Point at 6.5202 / Dlr Vs Last Close 6.5080.
- Fed’s Kaplan says Fed is struggling with figuring out how close U.S. is to full employment.
- Fed’s Lockhart says BOJ runs the risk of distorting markets in Japan through easing policies.
- Fed’s Williams says globally the natural rate of interest has fallen.
- Williams says the decline in the natural rate of interest raises questions about inflation targeting.
- Fed’s Lockhart says not practical to move away from fed's 2% inflation target.
- Williams - optimistic about achieving U.S. 2.0% inflation goal.
- Fed’s Bullard does not comment on economic outlook, stance of monetary policy in prepared remarks.
- Bullard ties taper tantrum, market volatility last August to ineffective unconventional monetary policy.
Economic Data Ahead
- (0410 ET/0810 GMT) EU retail PMI, previous 49.2.
- (0530 ET/0930 GMT) South Africa Business confidence, previous 81.2.
- (0730 ET/1130 GMT) India Forex reserves, previous 361.60B.
Key Events Ahead
- No key events scheduled for the day.
FX Recap
USD: The dollar firmed against the euro and yen on Friday ahead of the April U.S. non-farm payrolls due later in the day that could support the greenback. The dollar index was flat at 93.746 after touching a 3-1/2-month low of 91.919 on Tuesday.
EUR/USD: The euro, which had risen to an eight-month peak of $1.1616 on Tuesday, was effectively unchanged at $1.1405 after losing 0.8 percent overnight. Traders attributed the common currency's fall to covering of dollar short positions ahead of Friday's U.S. jobs data. Intraday bias remains neutral for the moment. A sustained break above $1.1466 will drag the parity up towards key resistances at $1.1529/$1.1622/$1.1785 and $1.1833 marks. Key supports are seen at $1.1314/$1.1215.
USD/JPY: The Japanese yen stood steady at 107.14 yen, having gained for three straight days to pull away from an 18-month low of 105.55 plumbed on Tuesday. The U.S. currency was en route to gain 0.6 percent versus the yen this week. Intraday bias remains neutral for the moment. A daily close below 106.15 will drag the parity down towards key supports at 105.71, 105.45 and 104.55 levels respectively. Alternatively, reversal from key support will take the parity higher towards key resistances at 107.87, 109.49, 111.23, 112.60 and 113.42 levels respectively.
GBP/USD: The Sterling fell against the dollar for a fourth straight day on Friday after a key services sector report added to concerns that the economy is stumbling in the run-up to a vote on whether Britain should quit the European Union. Sterling fell to a 10-day low of $1.4444, well below a four-month high of $1.4770 struck on Tuesday. It was last trading at $1.4475, still down 0.2 percent on the day. A daily close above $1.46 will take the parity up towards key resistances at $1.4769 levels. Alternatively, reversal from key resistance will drag the parity down at $1.4357 marks.
AUD/USD: The Australian dollar skidded 1 percent on Friday after the central bank slashed its inflation forecasts and markets rushed to price in not one, but two more rate cuts this year. The Australian dollar sank over half a U.S. cent to break under 74 cents for the first time in two months. The loss of major support at $0.7386 would likely see a test of $0.7336, the 50 percent retracement of the January-April move.
NZD/USD: The kiwi has dropped 1.7 percent this week, in part due to falling dairy prices and growing expectations of a rate cut in June by the RBNZ. New Zealand dollar fell to $0.6851 from $0.6884 early and away from recent 10-month highs. Key support was found at $0.6808. Resistance was seen at around $0.7054.
Equities Recap
Japan's Nikkei 225 index was down 0.83% at 16,013.65 on Friday morning in Tokyo, while the broader Topix index slipped 0.11% to 1,298.42 points.
Hong Kong's Hang Seng index was trading 1.42% lower at 20,160.35 points in early trade, while the Shanghai Composite index tumbled 1.43% to 2,954.98 points.
Australia's S&P/ASX 200 traded 0.44% lower at 5,255.90 points on Friday morning in Sydney.
New Zealand's S&P/NZX 50 index was trading 0.21% to 6,862.16 points on Friday afternoon in Wellington.
Commodities Recap
Oil prices dipped on Friday, dragged down by a surging dollar that at least temporarily outweighed supply disruptions in North America, where a massive wildfire was threatening Canada's huge oil sands operations. International benchmark Brent crude futures were trading at $44.73 per barrel at 0400 GMT, 28 cents below their last settlement. U.S.
Gold was set to post its biggest weekly decline in six weeks on Friday as the U.S. dollar firmed ahead of the U.S. non-farm payrolls report that could provide clues about the Federal Reserve's monetary policy. Spot gold was little changed at $1,278.70 an ounce by 0318 GMT. The metal has closed lower every session this week despite hitting a 15-month top of $1,303.60 on Monday.
Treasuries Recap
Australian government bond futures exploded on Friday, with the three-year bond contract touching a record of 98.450. It was last up 12 ticks to 98.440.
New Zealand government bonds rose, sending yields as much as 9 basis points lower on the long-end.
10-year U.S. treasury yield held at 1.747 percent vs U.S. close of 1.747 percent on Thursday.
BOJ offers to lend Y 4.079 trln of JGBs on spot basis through 5/9 as a secondary source of JGBs.
