FX Market News 27-4

Market Briefs

  • EUR/USD -0.05%, USD/JPY +0.2%, GBP/USD +0.5%, EUR/GBP -0.5%
  • DXY -0.1%, DAX -0.3%, FTSE -0.6%, Brent -1.0%, Iron ore +0.5%
  • GBP/USD rises to new 2017 high at 1.2917 in Europe
  • 3 German states report a rise in Y/Y CPI above ECB 2% target
  • DE May GfK Consumer sentiment 10.2 vs prev 9.8. 9.9 f/c
  • EZ Apr Business climate 1.09 vs prev 0.83 rvsd. 0.82 f/c
  • EZ Apr Economic sentiment 109.6 vs prev 108.0 rvsd. 108.1 f/c
  • EZ Apr Ind sentiment 2.2 vs 1.3 f/c. Serv sentiment 14.2 vs 13.0 f/c
  • EZ Apr Consumer conf final -3.6 vs prev -3.6. -3.6 f/c
  • GB Apr CBI retail sales balance +38 vs +9. +6 f/c. Strongest since Sept 2015
  • Swiss trade surplus widens y/y to 3.1 bln Sfr in March
  • Swiss National Bank posts 7.9 bln Swiss franc Q1 profit – Rtrs
  • Dovish Swedish cbank holds rates, extends bond purchases – Rtrs
  • Swedish crown falls vs euro after Riksbank hold rates, extends bond-buying
  • Euro zone bailout fund could become European Monetary Fund -Dijsselbloem – Rtrs
  • Merkel warns against British illusions in Brexit talks – Rtrs
  • Italy PM says EU must remain united during Brexit negotiations – Rtrs
  • BOJ keeps interest rate targets unchanged – Rtrs
  • BOJ most upbeat on economy in 9 years, warns stimulus exit distant – Rtrs
  • Kuroda: Will continue with QQE till CPI target met – Rtrs

Looking Ahead – Economic Data (GMT)

  • 13:30  Initial Jobless Claims (Apr 22 week) mkt 245k, prev 244k
  • 13:30  — Continued Claims (Apr 15 week) mkt 2.005 mn, prev 1.979 mn
  • 13:30  Durable Goods Orders (Mar) mkt +1.2% m/m, prev +1.8% m/m
  • 13:30  — Durable Goods Orders ex-Trans (Mar) mkt +0.4% m/m, prev +0.5% m/m
  • 13:30  — Durable Goods Orders ex-Defense (Mar) prev +2.2% m/m
  • 13:30  — Nondefense Capital Goods Orders ex-Aircraft (Mar) mkt +0.5% m/m, prev -0.1% m/m
  • 13:30  Advance Goods Trade Balance (Mar) prev -$63.9 bn
  • 13:30  Advance Wholelsale Inventories (Mar) prev +0.4% m/m
  • 13:30  Advance Retail Inventories (Mar)
  • 15:00  Pending Home Sales Index (Mar) mkt 111.2, -1.0% m/m; prev 112.3, +5.5% m/m
  • 15:00  Housing Vacancies and Homeownership Rates (Q4)
  • 16:00  KC Fed Manufacturing Index (Apr) prev 20

Looking Ahead – Events, Other Releases (GMT)

  • 11:45  ECB policy announcement, no change in zero% refi, -0.4% depo rates f/c
  • 12:30  ECB Pres Draghi press conference

Currency Summaries
EUR/USD

  • Early bid sees EUR/USD to 1.0921 but pair back to 1.0892 before NA open
  • Data EUR supportive but has fleeting impact
  • German state CPI data higher across the board, 3 states top ECB’s 2% target
  • German consumer sentiment improves to 10.2 from 9.8
  • Euro zone inflation expectations dip but other confidence measures improve
  • ECB statement key today, Friday’s EUR 5bln expiries 1.0900-50 may anchor

USD/JPY

  • USD/JPY trades a narrow 111.02-111.43 range, BoJ has little effect
  • Large amount of supply around Wed’s 111.78 peak, but exporters bide time
  • Bulls have the upper hand but need weekly close above 111.39
  • Importers back to buy-dip strategies, sub-111.00 now
  • UST-JGB yield spread 30/60-day correlation significant across the curve
  • Recent UST-JGB recent widening has helped to underpin USD/JPY


EUR/CHF

  • EUR/CHF a little lower in line with EUR/USD. 1.0843-1.0821 Thurs
  • Correction from Tuesday’s 1.0869 peak tested 1.0817 Wed
  • Tech support also by there. Charts favor correction inside Bolli bands
  • FX reserves help boost SNB profit in Q1 – c.bank posts 7.9bln profit
  • USD/CHF quiet 0.9940-0.9925. CHF/JPY off Wed peak but retains bid tone
  • Cross plays 111.79 to 112.09. 112.31 was Wed high, cloud pull remains


GBP/USD

  • GBP/USD rose to a fresh 6mth high of 1.2917 in early Ldn trade
  • 1.2877 was  Asia top. 1.2863 was Wednesday high (pre-Ldn fix)
  • Expectations of Tory election landslide lending support to GBP
  • EUR/GBP slid to an intra-week low of 0.8444 during the European am
  • Cross sub-0.84 last Friday, before Macron win boosted EUR


USD/CAD

  • USD/CAD met headwind at 1.3600 after rising from 1.3530 (Asia low)
  • Large 1.3600 option expiry for NY cut, $1.15bln strike
  • 1.3530 plumbed after Trump said no NAFTA exit yet
  • USD/CAD scaled a 14mth peak of 1.3648 in Asia pre-Trump’s NAFTA steer


AUD/USD

  • AUD/USD met headwind at 0.7492 in Asia after AUD boosted by CAD gains
  • 0.7492 is a former support turned resistance level (last week’s low)
  • 0.7467 = European am low. 0.7455 was Wednesday’s 4mth low
  • Large 1.0850 option expiry for NY cut exerting magnetism over AUD/NZD
  • A$903mn strike. 1.0820 was cross low in Asia

NZD/USD

  • NZD/USD retreated to 0.6885 during the European am
  • 0.6920 was Asia high after NZD elicited boost from CAD gains
  • NZD/USD plumbed 4mth low of 0.6873 Wednesday


FX OPTIONS

  • Minimal ECB risk today, but O/n EUR looks rich at 18.0/80 pips break even
  • 1.8bln EUR/USD expiries 1.0850-1.0900 today and Friday sees 5bln 1.0900-50
  • 1 week vols get May ECB, 8 day gets NFP, long UK/EU hol weekend ahead
  • JPY related vol recovery falters, supply back since BoJ. Golden week looms
  • AUD vols supported now, CAD vol gamma bid. Cable vols at l/term lows

COMMENT
Riksbank surprises again: dovish stance held

Swedish interest rates held at -0.5%, QE programme extended to H2 2017 but a split vote on bond buying and inflation again trumps the broader economic revival. The market had probably got ahead of itself in looking for a hawkish slant to today’s policy meeting but the run of positive economic data supported a slight change in the central bank’s tone. Inflation is key and the subdued outlook has forced the c. bank to push the first policy tightening further down the road to mid-2018. On today’s meeting outcome it is hard to see a hawkish element emerging for some time and likely not before the turn of the year. For the SEK a further period of range trading and price data watching. EUR/SEK climbed quickly to 9.60 and for the one-month horizon a 9.55-9.75 range likely with upside risk.

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