Market Briefs
- DXY -0.55%, USD/JPY -0.65%, EUR/USD +0.5%, GBP/USD +0.1%.
- USD/JPY hits new low 105.55, Cross Supported by EUR/USD.
- Brent -1.05%, Gold +0.5%, AUD/USD -1.10%.
- Swiss Q2 Consumer Confidence at -15 vs -14 previous.
- UK Apr Manufacturing PMI at 49.2 vs 51.00 previous, 51.2 expected.
- EZ Mar Producer Prices at -4.2% y/y vs -4.2% previous, -4.3% expected.
- EU Commission forecasts Spain to miss goal of sub-3% deficit goal.
- Australia central bank cuts rates 25bps to 1.75%.
- RBA says rising AUD could complicate economic adjustment.
- China Apr Caixin Manufacturing PMI 49.4, 14th month of contraction vs Poll 49.9, Mar 49.7.
- China Apl Caixin PMI shows job losses, weak exports persist.
Economic Data Preview
- (0800 ET/1200 GMT) Brazil's industrial output in March is likely to have risen 1.6 percent from February but retreated 10.8 percent from a year earlier.
- (1330 ET/1730 GMT) U.S. automakers are expected to report that auto sales rose to an annual pace of 17.25 million units in April from a 16.57-million-unit pace in March. If April does not sell above 17 million on an annualized basis, this month could be tagged the beginning of the end of the high part of the cycle.
- (1630 ET/2030 GMT) API reports weekly crude oil stocks.
- (1901 ET/2301 GMT) The British Retail Consortium (BRC) releases its shop price index m/m for April. The index dropped 1.7 pct in March.
Key Events
- (0800 ET/1200 GMT) Federal Reserve Bank of Atlanta President Dennis Lockhart speaks with reporters on monetary policy and the economy prior to delivering welcome remarks at a financial markets conference in Amelia Island, Florida. These are his first public comments since the U.S. Federal Reserve's April meeting.
- (0945 ET/1345 GMT) FedTrade Ops 30-yr F.Mae/Fr.Mac max $2.4 bln.
- (1030 ET/1430 GMT) The Federal Reserve Bank of Cleveland President Loretta Mester will introduce and moderate a panel on "Unconventional Wisdom: How Will Unusual Monetary Policy Affect Market Liquidity?" at the Federal Reserve Bank of Atlanta's Financial Markets Conference.
- (1230 ET/1630 GMT) Bank of Canada Governor Stephen Poloz will participate in a panel at the Milken Institute in Los Angeles, entitled "Monetary Policy: Out of Ammunition?". Investors will watch Poloz's stance on how much more central bank policy can do.
- (1900 ET/2300 GMT) Lockhart speaks on the economic outlook and monetary policy before the World Affairs Council of Jacksonville.
Equities Recap
The markets were doubtful about global central banks' effectiveness to boost growth through aggressive policy easing. The Europe's FTSE 300 index of leading 300 shares fell 1.3 percent and Germany's DAX shed 1.7 percent, both the lowest in nearly three weeks. The UK's FTSE 100 index was down 0.8 percent at 6,191.90 points.
Australia's stock markets cheered the surprise rate cut from RBA, extended gains to close up more than 2 percent on the day. While Japan markets were closed on national holiday. China's CSI300 index ended up 1.8 pct at 3,213.54 points, Shanghai Composite Index closed up 1.8 pct at 2,992.64 points and HK’s Hang Seng Index lost 1.9 pct at 20,676.94 points. MSCI's broadest index of Asia-Pacific shares outside Japan dropped to a 3-week low, while emerging market stocks were 0.7 percent lower.
Commodities Recap
Oil proces dropped as increasing output from the Middle East and North Sea renewed concerns about a global supply overhang. Brent crude futures were trading 37 cents lower at $45.46 per barrel at 0919 GMT, retreating from earlier gains. U.S. crude futures were also down 37 cents at $44.41 per barrel.
Gold climbed and was trading around $1,300-an-ounce as the dollar and European shares dropped, triggering further investment in physically-backed gold funds. Spot gold climbed 0.5 percent to $1,297.11 an ounce by 1005 GMT, after earlier hitting a session high of $1,302.00.
Treasuries Recap
The U.S. Treasury yields were down 3 basis points across the curve from two-year maturities out to 30-year maturities. The benchmark 10-year yield was at last at 1.814 percent, down 2.47 pct .
The European bonds strengthened after EU Commission in its latest spring report lowered Euro zone's GDP growth outlook. Also, tumbling crude oil prices drove investors towards safe-haven assets. The benchmark German 10-year bonds yield fell 10.91 pct to 0.244 pct. The yield on 10-year Portuguese government bonds fell more than 6 basis points, extending Monday's falls, to a one-month low of 2.915 percent
The U.K government bonds gained after the data showed weaker-than-expected April manufacturing PMI amid rising worries among investors about the up-coming June referendum. Also, tumbling crude oil prices drove investors towards safe-haven assets. The yield on the benchmark 10-year bonds fell 1.25 pct to 1.578 pct.
The Australian bonds jumped as investors shifted to safe assets after Reserve Bank of Australia lowered its interest rate by 25 bps to historic low of 1.75 pct. The yield on the benchmark 10-year Treasury note tumbled 2.62 pct to 2.445 pct, while the New Zealand government bonds eased, sending yields 1 basis points higher at the long end of the curve in the Asian session.
FX Beat
USD: The U.S. dollar hit its lowest against major currencies since Jan 2015 on Tuesday, supported by the yen's continued rise as investors were doubtful about central banks' ability to boost growth through aggressive policy easing. The dollar index was down 0.37% to 92.27.
EUR/USD: The euro burst through $1.1614 for the first time in eight months pushed European shares deeply into the red. It was trading around 1.15839 at the time of writing. The short term trend is slightly bearish as long as resistance 1.16200 holds. On the lower side any break below 1.1540 will drag the pair down till 1.1500/1.14480. Any break above 1.162 will take it to next level till 1.1680/1.1725. The short term weakness is only below 1.1270 (low formed after Fed meeting).
USD/JPY: The yen rallied to 105.60 per dollar, its highest since October 2014, extending gains that have undermined Japanese officials' attempts to reflate the developed world's most stagnant economy. The short term trend is slightly bearish as long as resistance 107.60 (3 W EMA) holds. On the lower side any break below 105.20 (200 W MA) will drag the pair down till 104.85/103. The minor resistance is around 107.60 and break above targets 108.50/109.35. The yen also rose sharply against the Australian dollar, up 1.7 percent after the Reserve Bank of Australia cut interest rates to record lows.
GBP/USD: The Sterling rose half a percent against a broadly weaker U.S. dollar, hitting its highest since the start of January and extending its gains against the greenback into a fourth straight week. It was up 0.6 percent at $1.4754 and was roughly flat against the euro at 78.53 pence at the time of writing. The short term trend is bullish as long as support 1.4650 (1 hour Kijun-Sen) holds. On the higher side major resistance is around 1.4750(161.8% retracement of 1.46388 and 1.44729) and break above targets 1.4800/1.4870 levels. On the lower side major support is around 1.4650 and break below targets 1.4600/1.4570 level.
USD/CHF: The pair has broken major support 0.9500 and declined till 0.9440. It was trading around 0.94684 at the time of writing. The short term trend is slightly bearish as long as resistance 0.9580 holds. Any violation above 0.9580 will take it to next level till 0.9630/0.9680. On the lower side any break below 0.9450 will drag the pair down till 0.9385/0.9350.
AUD/USD: The Australian dollar dropped sharply after the RBA's surprise rate cut of 25 bps with the currency falling below the 0.76 handle against the greenback from 0.77 earlier, it was trading around 0.75658 at the time of writing. The short term trend is slightly bearish as long as resistance 0.7650 holds. On the higher side major resistance is around 0.7650 and break above targets 0.7680/0.7720. The pair’s major support is around 0.7500 and break below will drag it till 0.7485/0.7435. The minor support is around 0.7540. The Aussie tumbled 1.8 percent against the yen and dropped to its lowest in two months against the euro and pound, while it touched a 6-month trough versus its Canadian peer.
NZD/USD: The New Zealand dollar dropped 0.6 percent to $0.6980, away from 10-month highs as the RBA move reinforced expectations of an easing by the Reserve Bank of New Zealand (RBNZ) in June.
