FX Market Update 4-5

Market Briefs

  • EUR/USD +0.4%, USD/JPY -0.1%, GBP/USD +0.3%, EUR/JPY +0.5%
  • DXY -0.15%, DAX +0.75%, FTSE +0.35%, Brent +0.75%, Copper -0.75%
  • Copper slides further after biggest one-day loss in 20 months – Rtrs
  • DE Apr Markit Services PMI 55.4 vs prev 54.7. 54.7 f/c
  • DE Apr Markit Comp final PMI 56.7 vs prev 56.3. 56.3 f/c
  • EZ Apr Markit Sev final PMI 56.4 vs prev 56.2. 56.2 f/c
  • EZ Markit Comp final PMI 56.8 vs rev 56.7. 56.7 f/c
  • GB Apr Markit/CIPS Serv PMI 55.8 vs prev 55.0. 54.5 f/c
  • GB Mar Mortgage lending 3.105bln vs prev 3.386bln rvsd. 3.400bln f/c
  • GB Mar Mortgage approvals 66.837k vs prev 67.936k rvsd. 67.400k f/c
  • Uk Mar Consumer credit +1.624bln vs prev 146bln. 1.3bln f/c
  • UK Mar M4 money supply growth +0.3% m/m vs prev -0.2% rvsd
  • EZ Mar Retail sales 0.3% m/m, 2.3% y/y vs prev 0.5%/1.7% rvsd. 0.1%/2.1% f/c
  • Swiss consumer sentiment index slips in Q2. -8 vs prev -3
  • Macron, Le Pen clash on euro, terrorism, in French pre-election TV showdown – Rtrs
  • Swedish c.bank’s Jansson says risky to move policy ahead of ECB – Rtrs
  • Swedish c.bank’s Jansson says tool box still full if needed – Rtrs
  • Norway’s central bank keeps interest rates on hold as expected – Rtrs
  • UK’s Prince Philip to step down from royal duties – Rtrs
  • Turkey’s EU membership secondary as long as EU standards achieved, minister says – Rtrs

Looking Ahead – Economic Data (GMT)

  • 12:30  Challenger Layoffs (Apr) prev 43,310
  • 13:30  Initial Jobless Claims (Apr 29 week) prev 257k
  • 13:30  — Continued Claims (Apr 22 week) prev 1.988 mn
  • 13:30  International Trade (Mar) mkt -$44.5 bn, prev -$43.6 bn
  • 13:30  Productivity (Q1) mkt +0.2% q/q AR, prev +1.3% q/q AR
  • 13:30  Unit Labor Costs (Q1) mkt +2.5% q/q AR, prev +1.7% q/q AR
  • 15:00  Factory Orders (Mar) mkt +0.4% m/m, prev +1.0% m/m
  • 15:00  — Factory Orders Ex-Trans (Mar) prev +0.4% m/m
  • n/a    Chain Store Sales (Apr)
  • 20:00  Treasury STRIPS

Looking Ahead – Events, Other Releases (GMT)

  • 14:45  FedTrade Operation 30-year Fannie Mae/Freddie Mac (max $1.6 bn)
  • 15:45  FedTrade Operation 15-year Fannie Mae/Freddie Mac (max $575 mn)

Currency Summaries
EUR/USD

  • EUR/USD opens softer to 1.0875 then rallies to reach 1.0936 in Europe
  • Bonds price out any French election risk:
  • Peripheral EZ yield follow, Spain & Italy tighten 7/4 resp vs Germany
  • EUR/JPY challenges Dec 8 2016 peak at 123.50 as DAX hits record high
  • US/bund 10 yr spreads tightens despite 80% chance June Fed hike
  • Heavy supply still until 1.1000 EUR/USD. 200-DMA 1.0833 pivotal below

USD/JPY

  • Some decent demand from a prominent Japanese bank saw spot rise in Asia
  • Spot stuck between 112.51-113.05 pivots, range has been 112.60-112.93
  • More exporter offers, amongst others, likely between 112.90/113.00 region
  • 112.90 is just above cloud 112.87 top, TL comes in @113.00
  • Major Japanese exporter offers likely in size around 113.40
  • 113.40 – 50% retrace of 118.66 to 108.13 fall. Bids said to be circa 112.50 level
  • GBP/JPY has exceeded previous 2017 high @145.40 posted in January

USD/CHF

  • USD/CHF sharply lower. 0.9958-0.9908 in Europe
  • Reject came fm circa 200-day MA at 0.9955 again. Below is bearish
  • 0.9892 was Wednesday’s low and price looks to set challenge here
  • EUR/CHF holds above 1.08. 1.0820-1.0842, supported by 200-HMA
  • SNB possibly working new 1.08 soft floor. Brief dip below Wed

GBP/USD

  • GBP/USD tripped stops sub-1.2850 en route to 1.2831 in early European trade
  • 1.2831 = 8-day low. Cable then rallied to 1.2896 high pre-UK service PMI beat
  • 1.2905 = high since UK service PMI beat. 1.2965 = recent 7mth high
  • EUR/GBP has risen to 0.8487 amid greater certainty of a Macron win Sunday
  • Offers ahead of 0.85 have kept a lid on the cross over the past week

USD/CAD

  • USD/CAD elicited support pre-1.3700 after retreating from 1.3746
  • 1.3746 = early Europe high. More bids are tipped at 1.3680-85
  • 1.3680 was Wednesday’s low. Poloz due to speak in Mexico City at 4.10pm ET

AUD/USD

  • AUD/USD extended south to a fresh 4mth low of 0.7395 during the European am
  • Losses influenced by commodity weakness: copper -0.5% after 4.5% slump Wednesday
  • AUD/USD stops tipped below 0.7380 & 0.7350. Offers mooted 0.7425-40

NZD/USD

  • NZD/USD eased to 0.6861 in early European trade as AUD/USD probed below 0.74
  • 0.6861 = 3-day low. 0.6847 was 10mth low last week (Apr 27)

FX OPTIONS

  • Markets quiet, Japan out, FOMC non event, awaiting NFP, light event premium
  • Low delta EUR puts remain elevated in to French election as tail risk hedge
  • Rest of EUR/USD curve 2yr lows, Cable vols lows since late 2016
  • USD/JPY curve steady/heavy, more downside potential after France vote
  • AUD vols only gainers today as spot falls sub 0.7400, 1mth 8.25 vs7.7

COMMENT
Norges Bank gives little away, pledges transparency

On the face of it little in the way of fresh policy bias from the Norges Bank but some clues noted. In-line with Reuters poll Norges Bank leaves key rate at 0.50% and provides no rate path view. Rhetoric suggests the c.bank sees little fundamental change in risks or outlook since the March meeting. For the tighter policy camp a fall in unemployment, weaker NOK and a faster pace of household debt growth mentioned. Case for the status quo supported by a slowing in house price inflation and looser policy amongst trading partners. On balance key factors support an on hold stance and unchanged rate path. ECB and NOK likely future policy drivers. Worth noting that the NB will be offering more transparency at future board meetings. Minutes will be published and voting records given.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s