Market Roundup
- G7 devising action plan to crack down on tax avoidance – Nikkei.
- Japan April foreign reserves +$410 mln to 1.262.509 bln, MoF confirms no direct FX intervention in Q1 ’16.
- Eiji Maeda appointed BoJ director of int’l affairs - Reuters.
- Australia AOFM announces A$7 bln 2.525% 2028 bond to settle May 19 - IFR.
- Australia May Westpac/MI consumer confidence index +8.5% m/m to 103.2, reverses falls in last two months, highest since Jan ’14, +0.8% y/y.
- Australia March owner-occupied housing finance -0.9% m/m, -1.5% eyed, value of investment housing finance +1.5%.
- RBNZ – Risks to financial stability up but system resilient, housing/dairy sectors of concern, assessing whether policy measures needed.
- New Zealand April REINZ median house prices +1.4% m/m, +7.7% y/y, volume +12.8% m/m.
Economic Data Ahead
- (0430 ET/0830 GMT) Great Britain Mar ind production, +0.5% m/m, -0.4% y/y eyed; last -0.3%, -0.5%.
- (0430 ET/0830 GMT) Great Britain Mar mfg production, +0.3% m/m, -1.9% y/y eyed; last -1.1%, -1.8%.
- (1400 ET/1800 GMT) United States Apr Federal budget, $100 bln surplus eyed; last $156.7 bln surplus.
Key Events Ahead
- N/A OECD Beijing Forum on Tax Administration (till Friday).
- N/A Norway government ’16 budget, updated outlook, wealth fund spending plan.
- N/A EBRD London annual meeting (till tomorrow).
- N/A Sweden SEK2 bln each 5% and 1% 2020 and 2026 government bond auctions.
- N/A Italy, Spain eyeing 50-year bond syndications, Italy at least E2 bln.
- (0400 ET/0800 GMT) Iceland CB policy announcement, monetary bulletin.
- (0500 ET/0900 GMT) Italy E6.5 bln 12-month BOT, Greece E875 mln 13-week bill auctions.
- (0530 ET/0930 GMT) Germany E5bln 0% 2018 Schatz auction.
- (0530 ET/0930 GMT) Portugal E0.75-1bln 2.875% ‘26 OT, Slovakia E500-700mln 0% ’23 GB sales.
- (0630 ET/1030 GMT) Italy EconMin Padoan speech at Rome conference.
- (0845 ET/1245 GMT) BoC DepGov Wilkins speaks at Montreal conference.
- (0900 ET/1300 GMT) UK ChancExch Osborne parliamentary testimony.
- (0900 ET/1300 GMT) BoE DepGov Bailey speaks at London event.
FX Beat
USD: The dollar index, against a basket of six major currencies, shed 0.2 percent to 94.063, moving away from its 2-week high of 94.356 set overnight. However, it remained well above a 15-month trough of 91.919 set on May 3.
EUR/USD: The euro trades 0.1 percent higher at 1.1380, though it remained below a 2016 high of 1.16160 hit on May 3. It made an intra-day high of 1.1391, pulling away from a low of 1.1358 hit in the previous session. In absence of significant economic data, markets will closely watch U.S. monthly budget statement for the month of Aril, for further momentum. Traders attention will remain on eurozone's gross domestic product for the first quarter preliminary data, scheduled later in the week. Immediate resistance is located at 1.1409 (Previous Session High), break above could take the pair to 1.1424. On the lower side, support is seen at 1.1356.
USD/JPY: The Japanese yen trades 0.4 percent higher at 108.81 to the dollar, having slipped 3 percent from its 18-month high of 105.55 set on May 3. The greenback declined after climbing to a 2-week high of 109.36 yen as investors locked in gains following its steep rise against the yen after intervention warnings from Japanese officials. Markets expect that Japan would be wary of conducting direct currency intervention ahead of G7 meeting later this month. Koichi Hamada stated that Japan will intervene in foreign exchange markets if the yen strengthens to 90-95 per dollar, even if that upsets the United States. Immediate support is located at 108.27 (Previous Session Low), break below could drag the pair to 108.14. On the higher side, resistance is seen at 109.36 (Session High).
GBP/USD: Sterling extended gains, having ended a 5-day losing streak against a broadly stronger U.S. dollar despite warning signals on the economic impact of Britain leaving the European Union. It trades at 1.4445, having touched an intra-day high of 1.4466. Against the euro, it trades lower at 78.80 pence, having gained 0.3 percent in the previous session. The BoE's monetary policy committee will release its interest rates decision, updated growth and inflation forecasts in a quarterly report on Thursday. Immediate resistance is located 1.4511 (10-DMA), break above could take the pair to 1.4542 (May 6 High). On the lower side, support is seen at 1.4388 (Previous Session Low).
AUD/USD: The Australian dollar trades 0.1 percent up at 0.7373, having touched early high of 0.7390. The Aussie made a low 0.7344, pulling closer to a 2-month trough of 73 cents touched on Tuesday, as oil prices gave up their overnight gains. It was weigh down by heavy yen buying and another decline in iron ore prices, Australia's top export earner. Markets attention will remain on U.S. budget statement, ahead of Australia's consumer inflation expectation figures, for further cues on the pair. Immediate resistance is seen at 0.7478 (May 6 High), while support is located at 0.7300 (Previous Session Low).
NZD/USD: The New Zealand dollar rose 0.6 percent to 68 U.S. cents, advancing well away from a recent low of 0.6717. The kiwi rallied across the board, after the Reserve Bank of New Zealand wrong-footed some investors by taking no new steps to curb Auckland's housing market. The pair rose to a high of 0.6825, before paring some gains to trade at 0.680. Immediate resistance is located at 0.6847 (May 9 High), break above could take the pair to 0.6878 (10-DMA). On the lower side, support is seen at 0.6751 (Session Low).
USD/CNY: The yuan firmed slightly and was fluctuating in line with the central bank's midpoint rate at 6.5209 per dollar, 0.04 percent firmer than the previous fix 6.5233. The spot market opened at 6.5148 per dollar and was trading at 6.5128 at midday, 0.09 percent stronger than the previous close. The offshore yuan was trading 0.37 percent weaker than the onshore spot at 6.5368 per dollar by midday.
Equities Recap
Asian shares reversed early gains as investors shrugged off an overnight rally in global stocks and rushed towards bonds in the absence of signs of a sustainable recovery in China and other emerging markets.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2 percent after being up as much as 0.4 percent in early trades. On Tuesday, it hit an 8-week low.
Shanghai Composite was trading 0.35% higher at 2,842.55 points. Taiwan stocks ended down 0.3 pct at 8,135.56 points
Hong Kong's Hang Seng index slipped 0.75% to 20,091.76 points. Seoul shares edged down 0.01 pct
Australia's S&P/ASX 200 index closed up 0.64 pct at 5,376.80 points, while Tokyo's Nikkei gained 0.08 pct at 16,579.01.
Commodities Recap
Oil prices traded flat as Canadian oil sand production was expected to gradually ramp up following forced closures due to wildfires, and as record crude inventories especially in the United States put pressure on markets. International Brent crude oil futures were trading at $45.54 per barrel at 0641 GMT, while U.S. West Texas Intermediate crude futures were down 8 cent at $44.58 a barrel.
Gold prices rose, drifting away from a 2-week low struck on Tuesday, its weakest since April 28. Spot gold was at 1,273.25 an ounce by 0640 GMT, having touching a high of 1,274.45. U.S. gold for June delivery gained 0.3 percent to $1,268.20 an ounce.
Treasuries Recap
The 10-year U.S. treasury yield stood at 1.752 percent versus previous close of 1.760 percent.
Japanese government bond prices were mostly lower, as caution took hold ahead of an upcoming 30-year debt auction. The benchmark 10-year yield was little changed at minus 0.100 percent. The 20-year yield rose 1.5 basis points to 0.275 percent and the 30-year yield was up a basis point at 0.320 percent.
Australian government bond futures ran into profit taking after recent gains. The 3-year bond contract lost 2 ticks to 98.420, having touched a record peak on Tuesday. The 10-year contract eased half a tick to 97.7000, while the 20-year contract fell 2.5 ticks to 97.0600. The 2-year cash bond yield edged up to 1.6 percent, from an all-time low of 1.5 percent touched last week.
New Zealand government bonds eased, sending yields as much as 5 basis points higher on the long-end.
Canadian government bond prices were higher across the maturity curve, with the benchmark 10-year rising 7 Canadian cents to yield 1.311 percent, while the 2-year price up half a Canadian cent to yield 0.526 percent.
