Market Roundup
- Boston Fed Rosengren - US close to passing test for June rate rise – FT.
- CFTC IMM CTA data – Specs cut short USD bets on Fed hike view.
- Summary – G7 reaffirmed existing FX agreements, important to implement fiscal strategies flexibly – Reuters.
- US-Japan disagreement on yen moves overshadows G7 meeting - Reuters.
- BoJ DepGov Nakaso defends NIRP, private sector help needed to boost growth, FX stability reflecting fundamental imperative, effect on economy large.
- Japan FinMin Aso – Reaffirms FX stability importance, recent move one-sided, recent 8-9 yen spike in 10 days “disorderly” - Reuters.
- US TsySec lew – Importance of adhering to G20 commitments, refraining from competitive FX devaluations, global economy uneven – Reuters.
- G7 united against Brexit but can only hope for an “in” vote – Reuters.
- UK ChancExch Osborne - Britain risks year-long recession if votes for Brexit.
- “Remain” camp gains ground, Brexit odds lengthened – RTRS, Opinium/Observer.
- Floating voters may hold key to Britain's EU future – Reuters special report.
- German FinMin Schaeuble – G7 has not made any big decisions, economies need structural reforms – Reuters.
- France FinMin Sapin – No big FX discrepancies, no need to intervene, no Currency war now - Reuters.
- IMF – Japan monetary easing has benefits for Asian economies – Reuters.
- BoJ seen preparing for exit from easing with reserves – Nikkei.
- Japan May PMI mfg – flash 47.6, lowest since Dec ’12, April 48.2, total new orders fall at sharpest pace in 41-months
. - Japan April trade surplus Y823.5 bln, Y492.8 bln forecast, exports -10.1% y/y, imports -23.3%, -10.0% and -19.0% forecast, exports to US -11.8%, China -7.6%, Asia -11.1%, April exports fall fastest pace in three-months.
- Japan April crude import volume -21.0% y/y, LNG -3.3%, thermal coal -16.3%.
- Japan’s retail investors flock to real estate – Nikkei.
- BlackRock’s largest mutual fund favor Japan despite yen concerns – Reuters.
- Hedge funds bet against Australia’s big banks in record numbers - WSJ.
Economic Data Ahead
- (0300 ET/0700 GMT) France May PMI mfg index - flash, 48.8 forecast; last 48.0.
- (0300 ET/0700 GMT) France May PMI services index - flash, 50.6 forecast; last 50.6.
- (0300 ET/0700 GMT) France May PMI composite index – flash, 50.2 forecast; last 50.2.
- (0330 ET/0730 GMT) Germany May PMI mfg index - flash, 52.0 forecast; last 51.8.
- (0330 ET/0730 GMT) Germany May PMI services index - flash, 54.6 forecast; last 54.5.
- (0330 ET/0730 GMT) Germany May PMI composite index – flash, 53.8 forecast; last 53.6.
- (0400 ET/0800 GMT) Eurozone May PMI mfg index - flash, 51.9 forecast; last 51.7.
- (0400 ET/0800 GMT) Eurozone May PMI services index - flash, 53.3 forecast; last 53.1.
- (0400 ET/0800 GMT) Eurozone May PMI composite index – flash, 53.2 forecast; last 53.0.
- (0945 ET/1345 GMT) United States May Market PMI mfg index – flash, 51.0 forecast; last 50.8.
- (1000 ET/1400 GMT) Eurozone May consumer confidence index – flash, -9.0 forecast; last -9.3.
Key Events Ahead
- Canada Victoria Day holiday.
- N/A Riksbank DepGov Skingsley speaks at Stockholm Fonddagen ’16.
- N/A UK 0.125% 2046 index-linked Gilt syndication.
- (0530 ET/0930 GMT) Germany E1.5 bln 12-month Bubill auction.
- (0800 ET/1200 GMT) SF Fed Williams presentation in New York.
- (0850 ET/1250 GMT) France E3.2-3.6/1.0-1.4/0.6-1.0 bln 3/6/12-month BTF note auctions.
- (0935 ET/1335 GMT) FDIC/ex-Fed Hoenig speaks at OECD/NABE Paris symposium.
- (1830 ET/2230 GMT) Philly Fed Harker speaks at Philadelphia event.
FX Beat
USD: The dollar index, against a basket of currencies, stood at 95.19, not far from Thursday's high of 95.520. It rose 0.8 percent last week, advancing for a third week.
EUR/USD: The euro rose 0.1 percent higher at 1.1229, pulling slightly away from a 2-month trough of 1.1180 plumbed on Thursday. The major touched an early high of 1.1242, from 1.1205. According to CME Group's FedWatch data, the chances for a June rate increase rose from around 4 percent at the start of the previous week to 30 percent on Friday. Futures markets now predict for a two rate hikes this year as compared to just one. The pair's gains will be capped as the dollar bulls were encouraged by recent comments from Federal Reserve officials as well as minutes of the Fed's April meeting for a rate hike in June or July possibility. Immediate resistance is located at 1.1278 (Apr-25 High), break above could take the pair to 1.1294. On the downside, support is seen at 1.1196 (Friday's Low).
USD/JPY: The Japanese yen gained, after the economy posted a trade surplus for the third consecutive month. Japan's trade balance for the month of April was 823.5 billion yen, against economists' forecasts for a 492.8 billion yen increase and previous 755.0 billion yen. The greenback trades 0.1 percent lower at 109.75 yen, pulling back from a 3-week high of 110.59 touched on Friday. It made a low of 109.63, from an early high of 110.23. The Group of 7 finance ministers' meeting ended with the United States warning Japan against intervening to weaken the yen, displaying a divergence between the two countries on currency intervention. Immediate support is seen at 109.63 (Session Low), break below could drag the pair to 109.36 (10-DMA). On the higher side, resistance is located at 110.58 (Previous Session High).
GBP/USD: Sterling steadied after retreating from a 2-week high of 1.4663. The pound has been supported by recent polls, suggesting easing possibilities of U.K leaving the European Union. Sterling trades 0.1 percent higher at 1.4522, pulling away from a low of 1.4485 stuck on Friday. Immediate resistance is located at 1.4535 (5-DMA), break above will take the pair to 1.4582. On the lower side, support is seen at 1.4485 (Previous Session Low). Against the euro, it trades lower at 77.33 pence, away from a 3-1/2-month high of 76.49 struck on Thursday.
AUD/USD: The Australian dollar steadied after declining in the previous three consecutive sessions. The Aussie trades 0.3 percent higher at 0.7244, having touched an early high of 0.7259 and away from a low of 0.7176 hit on Thursday. The major has slumped on the back of diverging interest rate outlook between the Australian and the United States economy. According to Commodity Futures Trading Commission data, the major has fallen nearly 5 percent this month with speculative funds reducing long Aussie positions. Markets will now closely watch RBA Governor Glenn Steven's Speech for further cues. Immediate resistance is located at 0.7285 (10-DMA), break above could take the pair over 0.7300 mark. On the lower side, support is seen at 0.7211 (Friday's Low).
NZD/USD: The New Zealand dollar rose 0.5 percent to 0.6792, away from a 2-month trough of 0.6710 touched last week. The rebound in the kiwi is triggered by rising expectations of cooling housing prices in New Zealand, however, it has declined nearly 3 percent so far this month, as markets expects the Reserve Bank of New Zealand may cut rates at its policy review of June 9. The major will continue to track broader market sentiment for fresh incentives. Immediate resistance is seen at 0.6830 (May 13 High), while on the lower side, support is located at 0.6746 (May 16 Low).
Equities Recap
Asian shares rose following gains on Wall Street, while the dollar pulled away from recent highs, however, remained supported as investors expect the Federal Reserve to raise rates soon.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6 percent, Taiwan stocks added 2.6 pct at 8,344.44 points and Hong Kong's Hang Seng index was trading 0.3 percent higher at 19,920.58 points.
Shanghai composite index was up at 2,839.64 points, while CSI300 index rsoe 0.2 percent to 3,084.88 points.
Australia's S&P/ASX 200 index lost 0.50 pct at 5,324.80 points, Tokyo's Nikkei ended down 0.49 pct at 16,654.60 and Seoul shares gained 0.41 pct.
Commodities Recap
Oil prices declined, on signals that global crude supply is holding up even as unplanned outages rise to at least a 5-year high. Brent futures were at $48.24 a barrel at 0630 GMT, after ending the previous session 9 cents down. U.S. crude futures fell 25 cents to $48.16 a barrel, after settling down 41 cents in the previous session.
Gold slumped on firmer Asian stocks and rising expectations that the Federal Reserve will hike interest rates as early as June. Spot gold edged down 0.1 percent to $1,250.61 per ounce by 0631 GMT, hovering near 3-week lows after declining for three days in a row.
Treasuries Recap
The 10-year U.S. treasury yield stood at 1.835 percent vs previous close of 1.849 percent.
Australian government bond futures were mixed, with the 3-year bond contract off 1 tick at 98.390. The 10-year contract edged up 1 tick to 97.7100, while the 20-year contract was steady at 97.0850.
New Zealand government bonds eased a tad across the short end of the curve, up 1 bps, while the long end was unchanged.
Canadian government bond prices were mixed across the maturity curve, with the 2-year price flat to yield 0.625 percent and the benchmark 10-year falling 1 Canadian cent to yield 1.349 percent.
