Since the update below, written over the weekend, we have a completely new set of parameters after Donald Trump announced on Sunday that US tariffs will go up to 25% on $200B of Chinese goods as soon as this coming Friday. The outcome of this has seen the US$ head sharply higher in early Monday trade, with the Aud$ particularly hard hit, currently trading down at 0.6970, while the Jpy has gapped higher, at 110.65. Elsewhere the S+P and the DJI have also gapped lower in very ealry trade, while Gold/Silver are firm, as a degree of safe haven demand sets in.. I will be back later in the day with a more relevant update.
Support/resistance levels, below, have been updated for the FX markets and US indices.
Despite the strong US employment report and NFP reading, which came in much stronger than expected, the US$ and yields both ended weaker on Friday, allowing commodities a reprieve, while the stock markets rallied, with the Nasdaq ending the week at yet another all-time high.
The Non-Farm payroll figure grew strongly, by 263k in April and well above expectation of 185k although the previous months reading was dialed back 196k to 189k. The headline unemployment fell to 3.6%, down from 3.8% beating expectations of 3.8% to record the lowest level since December 1969. The weakness seen in the dollar/yields seems to have been at the participation rate dropped by -0.2% to 62.8%, while the average hourly earnings rose 0.2% mm, below expectation of 0.3% mm although the previous month’s figure was revised up from 0.1% mm to 0.2% mm.
The big mover in the currency markets was actually Sterling, which rallied strongly on hopes of progress in the Brexit stalemate, after Jeremy Corbyn the Labour Party leader said that parliament must break the deadlock over Brexit and “get a deal done” to exit the European Union.
In term of EU data, the Eurozone CPI accelerated to 1.7% yy in April, up from 1.4% yy and beat the expectation of 1.6% yy while the core CPI accelerated to 1.2% yy, up from 0.8% yy and beat expectation of 1.0% yy.
Looking ahead, the main event from the US this week will be the CPI on Friday, and the main interest seems likely to lie in Australia and NZ where the RBA (Tue) and the RBNZ (Wed) will be meeting and where there is a good chance that both will cut interest rates. These will both be live meetings and there seems likely to be a fair bit of volatility whatever the outcome may be. The RBNZ seem more likely to cut than the RBA, given the Australian general election due in a couple of week’s time which may see the RBA hold back, although the latest poll showed that around 45% of economists expect a rate cut on Tuesday. Elsewhere, the highlights will be the China CPI/PPI and US PPI (Thur) and the RBA Statement on Monetary Policy and UK Q1 GDP (Fri).
Today will be busy for the Aud$, with the release of the Australian TD Inflation, ANZ Job Ads and the Caixin China Services PMI (exp 52.8), while later in the day it will be the EU Sentix Investor Confidence Survey and the EU Services PMIs that will be in focus. It is a UK holiday so liquidity will be thin, while the US will have a quiet session, pretty much devoid of data.
Economic data highlights will include:
Mon: Australian TD Inflation, ANZ Job Ads, Caixin China Services PMI, EU Services PMIs, EU Sentix Investor Confidence Survey, Retail Sales, UK Holiday, Fed’s Harker Speech
Tue: AIG Australian Performance of Construction Index, Retail Sales, RBA Interest Rate Decision/Statement, Japan Nikkei Mfg PMI, German Factory Orders, Global Dairy Trade Index, Consumer Credit Change, API Weekly Crude Oil Stock Inventory
Wed: VE Day Holiday, Japan Services PMI, China Trade Balance, RBNZ Interest Rate Decision/Statement/Press Conference, German Industrial Production, EU Non-Monetary Policy Meeting, EIA Crude Oil Stocks Weekly Change
Thur: China CPI/PPI, Japan Machine Tool Orders, Consumer Confidence Index, US PPI, Trade Balance, Wholesale Inventories, Jobless Claims, Fed’s Evans Speech
Fri: NZ Business PMI, Electronic Card Retail Sales, Japan Trade Balance, Australian Home Loans/Investment Lending for Homes, RBA Statement on Monetary Policy, China New Loans, German Trade Balance, UK Q1 Preliminary GDP, Manufacturing/Industrial Production, Trade Balance/Goods Trade Balance, US CPI, Fed’s Bostic Speech
Market moves, in brief:
FX: DXY 97.49 (-0.35%)
Bonds: US10Y; 2.528% (-0.61%), German 10Y; 0.026% (-13.76%), UK 10Y; 1.216% (+2.3%), Australian 10Y; 1.801% (+0.38%), NZ 10Y; 1.90% (+0.80 %), China 10Y; 3.40% (0.00%)
Stock Indices: DJI; +0.75%, S+P; +0.96%, NASDAQ; +1.58%, EUStoxx50; +0.39%, FTSE100; +0.40%, Shanghai Composite; +0.52%,
Metals: Gold $1279 oz (+0.66%), Silver $14.93 oz (+2.10%), Copper $2.822 lb (+1.35%), Iron Ore $93.81 per tonne (NYMEX) (+0.22%),
Oil: WTI $61.86 pb (+0.55%)
|INDICES / COMMODITIES|