HotForex Forex News

14:48 GBP/USD moves back closer to 100-pips trading range hurdle, around 1.2830

The GBP/USD pair prolonged its consolidative price-action and retreated from the top end of 6-day old trading range, albeit has managed to hold its neck above the 1.2800 handle.

Currently trading around 1.2825-30 band, today's mildly bearish tone lacks any fundamental drivers and could be solely attributed to a modest US Dollar recovery, despite of retreating US treasury bond yields. The downslide, however, has been limited as investors seems to have paused ahead of the US President Donald Trump's keenly awaited tax plan announcement, later during the day.

   •  GBP/USD: Downtrend now appears mature - Westpac

Looking at the broader picture, the pair has been oscillating within 100-pips broader trading range between 1.2750-1.2850. Against the backdrop of last week's strong up-surge to the highest level since early Oct., led by the UK PM Theresa May's surprise announcement to call for a snap election, the pair recent price action could be categorized as consolidative phase. Hence, it would be prudent to wait for a decisive break through the recent trading range before committing to the pair's next leg of directional move.

With an empty US economic docket, the pair remains at the mercy of USD price-dynamics and optimism surrounding Trump's promised package to overhaul the US tax code. 

Technical outlook

"The key support is Friday's low of 1.2765, with the pair turning bearish only below it. The next support and probable bearish target comes around 1.2710. A strong resistance comes at 1.2845, which means that the pair needs to accelerate through 1.2850 to be able to advance further, targeting then the 1.2900/10 region" writes Valeria Bednarik, Chief Analyst at FXStreet.


14:36 USD/JPY outlook shifted to bullish from neutral UOB

FX Strategists at UOB Group sees there is room for the pair to test the 112.20 region in the near term.

Key Quotes

“The strong rally in USD yesterday was unexpected. The up move appears incomplete and further USD strength towards the 111.55/60 high seen earlier this month seems likely”.

“The strong daily closing above the Monday’s peak of 110.60 has shifted the outlook for USD to bullish. While the rapid surge is already approaching the strong 111.55/60 resistance, a break above this level would not be surprising. The next resistance is at 112.20. In order to maintain the current momentum, any pullback should not move back below 110.30”.


14:35 GBP/USD: Downtrend now appears mature - Westpac

Tim Riddell, Research Analyst at Westpac, explains that the pronounced rise of GBP/USD pair of above 1.2615 (a key pivot now) suggests a test of the initial Brexit vote spike low and retracement level at 1.3055.

Key Quotes

“Daily momentum remains supportive, but is at extremes. Price action appears corrective, so any faltering could trigger a sharp slide back to the 1.2615 pivot”

Weekly

  • Weekly momentum has broken higher to support a further squeeze towards retracement levels in the 1.31 area (could even risk a spike towards 1.34)
  • However, price action off the 1.1840-1.20 area remains corrective and a retest of this area remains a likely scenario once corrections show signs of faltering”

Monthly

  • The maturing of the downtrend from 1.70’s continues with monthly momentum becoming more supportive
  • Current rebounds are seen as corrective, but further downside could complete the broader downtrend and could be relatively limited”

14:34 SEK vigilant on Riksbank meeting Danske Bank

Morten Helt, Senior Analyst at Danske Bank, gave his view on the prospects for the Swedish Krona ahead of the Riksbank meeting on Thursday.

Key Quotes

EUR/SEK traded lower yesterday on the back of strong labour market data. The cross might see more headwinds today as the NIER survey is likely to point to improved optimism in Sweden”.

“However, EUR/SEK downside potential should be limited, as focus remains on the very important Riksbank meeting tomorrow, where we expect the Riksbank to announce that it will not extend the current QE programme”.

“We still see risks skewed slightly to the upside for EUR/SEK on the Riksbank announcement, as we believe that the Riksbank will avoid sending a hawkish signal. Thus, we prefer to wait entering/adding short positions until after the Riksbank meeting”.


14:31 ECB: Draghi will have to be very careful in choosing his words - Rabobank

In view of Elwin de Groot, Head of Macro Strategy at Rabobank, Mr. Draghi will have to be very careful in choosing his words tomorrow as after all, it took quite some effort after the March press conference to “put the market back in its cage” and this could prove even harder if the Governing Council would let go now and succumb to an ‘all lights are green’ view of the world.

Key Quotes

“First of all because the lights on (core and wage) inflation are not green at all (despite a likely uptick in April driven by Easter) and even in European (French) politics nothing should be taken for granted these days. Secondly, because they need to stay in control. Signalling a change in the forward guidance and fiddling with the risk assessment is by no means an easy task because the ECB should maintain sufficient flexibility to take a pause or even a step back. For, once they go down the route of tapering (followed by rate hikes), it may prove difficult to reverse course again.”

“Markets are very good at compressing a host of expected events expected to take place over a protracted period of time into one single market move and that is where the risk lies. Too much of a reaction in EUR (already trading at over 1.09) or in sovereign spreads could ultimately backfire. This, we think, is one reason for Mr. Draghi to keep his composure and try to resist pressures for changing their forward guidance and risk assessment too early in the game. QE was a marathon rather than a sprint; but any runner can tell you that the cooldown is equally important to prevent injuries.”


14:27 EUR/USD: Rebounds should struggle to sustain levels above mid-range Westpac

Tim Riddell, Research Analyst at Westpac, notes that the 1.05 held in early March for EUR/USD pair which avoided downdraft risks, and has allowed for an early push into the central band of EUR/USD’s broad range (effectively 1.04-1.16).

Key Quotes

“Daily momentum is in extended areas but remains supportive. A push above 1.0980 (medium term 50%) appears likely before EUR retraces lower again.”

“Weekly

  • Risk of a range-flip lower was negated by the close above 1.0650 and current rebounds could push into the upper half of the broad pennant like range
  • Certain weekly momentum indicators have broken higher, but bias is for EUR/USD to struggle to sustain levels above 1.10 before sliding to retest range lows”

“Monthly

  • EUR/USD continues to consolidate within a horizontal triangle/pennant. Such patterns normally precede a final leg lower to complete a long term trend
  • Monthly momentum remains neutral, but is mildly supportive. Risk of an early base should not be ignored, but a downside range flip is still favoured”

14:26 USD/TRY tumbles to 2-month lows near 3.5600 on CBRT

The Turkish Lira is quickly appreciating vs. the greenback today, dragging USD/TRY to fresh lows near the 3.5600 region.

USD/TRY weaker post-CBRT

TRY met a wave of buying pressure after the Turkish central bank (CBRT) left unchanged its key rates at today’s meeting.

In fact, the CBRT left intact the One-Week Repo Rate at 8.00%, the O/N Borrowing Rate at 7.25% and the O/N Lending Rate at 9.25%. The central bank, however, rose the Late Liquidity Window (between 4pm and 5pm) lending rate by 50 bp to 12.25% from 11.75%.

The CBRT noted that it remains ready to use all available instruments to pursue price stability, while it would maintain the current tightening bias until the inflation outlook improves.

USD/TRY key levels

At the moment the pair is losing 0.46% at 3.5634 and a breakdown of 3.5608 (low Apr.26) would open the door to 3.5552 (low Feb.23) and then 3.5243 (2017 low Jan.2). On the other hand, the next up barrier is located at 3.5990 (high Apr.26) seconded by 3.6047 (high Apr.25) and finally 3.6411 (high Apr.24).


14:23 Canada: Retail sales forecasted to decline by 0.4% m/m - TDS

According to the research team at TDS, the Canadian retail sector is expected to cool in February, with headline sales forecast to decline by 0.4% m/m.

Key Quotes

“Weaker gasoline prices will act as a significant headwind for nominal consumer spending while a broader decline in seasonally adjusted consumer prices should lead to a modest outperformance in volumes. Auto sales are expected to edge higher amid industry reports showing increased sales activity, which could result in a record month. Meanwhile, a sharp rise in home sales should drive demand for furniture and furnishings.”

“Outside of transportation and housing, we can expect a more disappointing performance with a number of industries likely to see sales pullback following the sharp increase in January. However, this is unlikely to cause great concern for the Bank of Canada amid heightened anxiety over household imbalances and a desire to see a more balanced growth profile. Furthermore, the Bank is unlikely to be overly concerned with a modest deceleration in February due to the strength of real retail sales last month, which will serve as an anchor for the quarter.”

Foreign Exchange

  • A softer headline could add to the weaker tone in CAD. We note that some key releases (notably, March inflation) have missed expectations over the past few weeks. A turn in data surprises and the recent trade announcements have seen CAD underperform the broader G10 the past two weeks. Even so, we think that much of the move is overblown and prefer fading the rallies as we approach critical technical levels.
  • The pair is trading over two standard deviations rich from our read of the cyclical drivers, suggesting the bar is low to trigger a consolidation in it. What’s more, the survey of economists shows the market is leaning towards a softish number so a weak number might be absorbed better given the low bar for a positive surprise. Nonetheless, our bias is to continue to fade the rally in USDCAD with 1.3650 the next key level to watch and our HFFV pointing to move back below 1.33.”

14:19 USD/JPY: Uptrend to resume - Westpac

Tim Riddell, Research Analyst at Westpac, suggests that the sharp upturn in daily momentum of USD/JPY pair that has accompanied the gap back above 109.40 implies a rejection of the slide below 109.00.

Key Quotes

“Risk of closing the 109.40-60 gap should not be ignored, but price action suggests an early surge into the 112.15 to 114.65 retracement zone during May.”

Weekly

  • Although weekly momentum shows signs of turning, it is yet to move as decisively as price action. Together they could signal a return to the uptrend of late 2016
  • Even if the slide from 118.65-108.15 was the first part of a broader consolidation, a sharp move through this range should develop into mid-2017”

Monthly

  • Rejection of levels below 109.00 suggest that correction of the uptrend from mid- 2016’s lows may have completed
  • Monthly momentum has remained supportive throughout. Potential for a full retest of 125-126 remains (could even extend towards 135-140 area)”

14:15 ECBs stimulus measures continue to support bank lending - Rabobank

Elwin de Groot, Head of Macro Strategy at Rabobank, points out that the ECB’s Bank Lending Survey for April concluded that the central bank’s stimulus measures continue to support bank lending.

Key Quotes

“Loan conditions eased, while the lower interest rates continue to boost demand for credit. That said, the growth in credit demand did slow: demand from corporate borrowers was up ‘only’ 6%, as compared to 18% in the final quarter of 2016. Similarly, growth in credit demand by consumers slowed slightly.”

“Whilst the credit growth numbers are an encouraging indicator of the pass-through of ECB policy into the economy, the BLS also contained some warning signs of adverse effects on future policy effectiveness. Banks responded that the APP continues to contribute to their liquidity position and financing conditions, but that their profit margins are deteriorating at the same time.”

“In addition, more banks have indicated that they see negative impact from the sub-zero deposit facility rate on their margins. If this trend persists, this could ultimately limit banks’ capacity to make new loans, which could render ECB policy less effective. Although we argue here that we find it unlikely that the ECB will hike rates before the asset purchase programme has been wound down, it could mean that the ECB does not want to wait too long after QE has ended before it also ends the negative deposit rate policy.”


14:08 CBRT leaves key rates unchanged, raises LLW

The Turkish central bank (CBRT) left unchanged the One-Week Repo Rate, the O/N Borrowing Rate and the O/N Lending Rate at 8.00%, 7.25% and 9.25%, respectively at today’s meeting, matching iniyial estimates.

The central bank, however, raised by 50 bp its Late Liquidity Window lending rate to 12.25% from 11.75%.


14:03 EUR/USD extends profit-taking slide, back below 1.0900 handle

The EUR/USD pair extended its retracement move from yearly tops and slipped below the 1.0900 handle, currently probing daily lows near 1.0885 level. 

Spot eroded over 50% of previous session's up-move amid modest greenback recovery. In fact, the key US Dollar Index has now moved within striking distance of reclaiming the 99.00 handle and seems to be the key factor prompting traders to take some profit off the table, especially after the post-French election up-surge of over 200-pips.

Meanwhile, receding risk-on trade, as depicted by retreating German and the US treasury bond yields, further weighed on the shared currency and collaborated to the pair's pull-back from the highest level since Nov. 10.

   •  Europe: Bond investors having more eye for the upcoming ECB meeting - Rabobank

The latest leg of profit-taking slide could also be attributed to some position readjustment ahead of the keenly awaited tax reforms announcement by the US President Donald Trump and tomorrow's ECB monetary policy decision. 

There are no macroeconomic data due for release on Wednesday and hence, the pair remains at the mercy of the yield dynamics and Trump's tax plan, expected to be announced later during the day.

Technical levels to watch

A follow through selling pressure now seems to abate near the very important 200-day SMA support near 1.0840 region, which if broken could extend the corrective slide even below weekly lows support near 1.0820 level, and the 1.0800 handle, towards testing a previous resistance, now turned support, near 1.0775-70 region.

On the upside, sustained recovery back above the 1.0900 handle now seems to confront resistance near 1.0925-30 region, above which the pair is likely to aim back towards retesting multi-month tops resistance near mid-1.0900s.


14:02 NZD/USD: Risk has swung towards deeper retracements into mid-2017 - Westpac

Tim Riddell, Research Analyst at Westpac, explains that although support is evident between 0.6860 and 0.6890 for NZD/USD pair, the sharpness of the slide from 0.7055 and the turn lower in daily momentum suggest deeper declines.

Key Quotes

“A swift regaining of levels above 0.6985 is needed to avoid a potential flush towards the 0.6715-30 area.”

Weekly

  • Weekly momentum may be at neutral levels but has a declining bias. The failure to regain channel support (above 0.7100) underscores this downside bias
  • Further slippage below 0.6890 could trigger a period of deeper retracements to define range support into mid-2017”

Monthly

  • The break of channel support and neutral to negative monthly momentum opens the risk of deeper retracements into 2H’17
  • However, longer term patterns still suggest that such retracements will define consolidation support within a broad 0.6500-0.7250 range”

14:02 United States MBA Mortgage Applications rose from previous -1.8%to 2.7% in April 21


14:01 Turkey TCMB Interest Rate Decision in line with expectations (8%) in April


13:57 Europe: Bond investors having more eye for the upcoming ECB meeting - Rabobank

Elwin de Groot, Head of Macro Strategy at Rabobank, suggests that in Europe, bond investors seemed to have more eye for the upcoming ECB meeting tomorrow.

Key Quotes

“Peripheral spreads widened alongside a 5bp rise in German 10-year yields. Against the backdrop of a string of better economic (survey) data off late and the French election result, there is at least some reason to expect (or be concerned) that the game between the doves and hawks in the Council could be on again.”

“The hawks could use the latest developments as an excuse to put renewed pressure on the doves to reign in monetary stimulus at the earliest date feasible. The Eonia forward for the December ECB meeting swap rose almost 1 basis point. That may not sound like a lot but it followed a sharper rise on Monday taking the move since last week to almost 3bp. That’s equivalent to a 30% rise in the probability of a deposit rate hike by that time.”


13:48 Evening Standard/IPSOS UK election poll: Conservatives 49%, Labour 26%

The latest Evening Standard/ IPSOS UK election poll results, published on Wednesday, showed UK Conservatives at 49% and Labour at 26%.


13:48 AUD/USD: Multi-year decline completed, downside retracements within a broad consolidation - Westpac

Tim Riddell, Research Analyst at Westpac, suggests that the recent AUD/USD rebounds have been limited and daily momentum is now back to neutral territory while the support in the 0.7450-0.7500 area is vulnerable

Key Quotes

“Any rebounds towards 0.7600 should be seen opportunities to sell for a redefining of recent support with potential for a slide towards 0.7375-80.”

Weekly

  • The roll over in momentum after early March highs suggests that range resistance was further defined with current bias for a further slide to define range support
  • Certain momentum indicators may now be neutral, but price action suggests that rebounds will be limited and further range (downside) retracements are likely”

“Monthly

  • A long term base formed into 2016. However, a broad consolidation/trading range is forming, rather than an impulsive turn, with momentum pausing at neutral levels
  • Any AUD should be temporary, defining consolidation resistance. Bias for further pullbacks into 2H’17 remains”

13:42 Oil: OPEC production cuts to turn into solid oil inventory draws? Goldman Sachs

Analysts at Goldman Sachs believe that it is just a matter of time before the OPEC production cuts to turn into solid oil inventory draws.

Key Quotes

“Since before the OPEC cut, we have argued: (1) that OPEC’s incentives have been to normalize OECD inventories through a short-term, tactical cut; (2) that oil draws were not expected to materialize until 2017Q2, with the US being the last place to see inventories draw. We continue to believe in this analysis, and have subsequently argued that the oil market is indeed making progress on rebalancing, despite the record highs in US crude inventories over 2017Q1.”

“We continue to expect sharp inventory draws in 2017Q2, and see March weekly US oil data as supportive of this view, with a seasonally-adjusted deficit (thanks to strong weather-adjusted oil demand growth), and imports from the Middle East finally declining with the lagged effects of the late 2016 supply push now ending.”


13:38 Australia 2017 Q1 CPI: Fuel & dwellings add to seasonal boost but competitive pressures remain Westpac

Justin Smirk, Senior Economist at Westpac, notes that the Australian Q4 CPI printed 0.5% compared to Westpac’s forecast for 0.6% and the market median was also 0.6%.

Key Quotes

“The annual rate is now 2.1%yr compare to 1.5yr in Q4, 1.3%yr in Q3 and 1.0%yr in Q2. The June quarter was the lowest rate of annual inflation since June 1999.”

“The core measures, which are seasonally adjusted and exclude extreme moves, rose 0.4% on average compared to the market’s expectation of 0.5% rise. Westpac’s forecast was also 0.5%. In the quarter, the trimmed mean gained 0.48% while the weighted median lifted 0.38%, both on the softer side of expectations highlighting just how modest the broader inflation picture is outside a few isolated sectors. The annual pace of the average of the core measures is now 1.8% from 1.5%yr in Q4 and Q3.”

“The six month annualised pace of core inflation came in 1.8%yr, a modest lift from the 1.6%yr pace in Q1, making this the eighth quarter in a row the six month pace has been below the bottom of the target ban. Our current forecasts do not see the six month annualised pace of core inflation returning to the band till the March quarter 2018.”

“As always there were surprises in the quarter even from the components we have some data on but this time they were quite modest. Our forecast 0.6%qtr was based on large contribution from power bills, auto fuels and the usual seasonal bump in health care, domestic travel and education being partially offset by falling fruit & vegetables, seasonal discounting for clothing, footwear and household contents plus the steady decline in audio visual & computing prices.”

“What stood out compared to our forecasts was the stronger rise in dwelling prices (1.0%qtr vs 0.5%qtr expected) but this was the only significant upside surprise. Food prices overall fell –0.2% (0.0% expected) while household contents & services were down 1.0% (1.0% expected), health costs rose just 2.0% (2.6% expected), car prices continue to fall (–0.5% vs 0.5% expected) and a surprising 1.9% fall in holiday travel (+0.9% expected) due to an unexpected fall in domestic travel costs.”

“The March quarter continues the run of softer inflation prints as the competitive margin squeeze appears to remain in place. Dwelling costs have lifted a bit (we don’t know if that is due to the inclusion of attached dwellings prices) and rising power bills are coming through but rent inflation remains very modest. So even with inflationary expectations drifting back towards the long-run average (we suspect fuel and power bills are responsible for this) there is little in this release to suggest that inflation is gathering any momentum.”

“Our preliminary estimate for the core measures for Q2 2017 is 0.5%qtr/1.7%yr holding inflation below the bottom of the RBA’s target band.”


13:34 Hollande spokesman tells all ministers to do what they can to keep Le Pen score as low as possible - Reuters

The French President Hollande's spokesman was out on wires, via Reuters, telling all ministers to do what they can to keep Marine Le Pen score in the second round as low as possible.

Meanwhile, the EUR/USD major extended its retracement move from yearly tops and slipped farther below the 1.0900 handle.


13:17 USD/CAD sidelined near 1.3570

After clinching fresh 2017 highs near 1.3630 on Tuesday, USD/CAD has now faded the spike and looks to consolidate in the 1.3570 region for the time being.

USD/CAD focus on politics, oil

The Canadian Dollar is recovering part of the recent downside after dropping to fresh YTD lows vs. the buck in the 1.3630 region on Tuesday, and is now dragging spot to the 1.3570/65 band during the European morning.

CAD has suffered the recent announcement from President Donald Trump regarding the Canadian exports of softwood lumber, while yields of the Canadian 2-year reference are easing some ground from recent tops.

In the data space, Canadian Retail Sales are expected to have contracted at a monthly 0.1% in February. In the US, the weekly report on crude oil stockpiles by the EIA is only due later in the NA session.

USD/CAD significant levels

As of writing the pair is losing 0.04% at 1.3568 and a breakdown of 1.3533 (23.6% Fibo of the April up move) would open the door to 1.3496 (low Apr.25) and finally 1.3408 (low Apr.24). On the upside, the next hurdle is placed at 1.3584 (high Apr.26) seconded by 1.3629 (2017 high Apr.25) and then 1.3861 (high Feb.24 2016).


12:47 German govt. lifts 2017 growth forecast to 1.5%

According to the latest government forecast, released on Wednesday, German economy is now expected to grow by 1.5% in 2017, up 0.1 percentage points from the previous forecasts in January. GDP growth forecast for the year 2018 was left unchanged at 1.6%.

German EconMin reaffirmed that economy remains on growth path despite of global uncertainties.

Meanwhile, current account surplus for Euro-zone's biggest economy is expected to fall from 8.3% of GDP in 2016 to 7.3% in 2018, primarily due to strong domestic demand and high oil prices.


12:35 Australia: Import and export price index to stay in focus tomorrow - Westpac

The research team at Westpac, expects the Australian import price index to contract by 0.4% and export price index to surge by 6% in the first quarter.

Key Quotes

“In the March quarter, the price of imported goods most likely edged lower, down a forecast 0.4%. This continues the downward trend of late, to have prices 2% below the level of a year ago. Import prices weakened over the past year largely because of the partial rebound in the Australian dollar.”

“In Q1, the Australian dollar appreciated by almost 2% on a TWI basis to be about 7% higher than a year ago. However, higher energy prices in the period will provide a partial offset to the dampening impact of the stronger currency. Gasoline price rose by around 10% in the opening quarter of 2017, extending the rebound since mid-2016.”

“Export prices rebounded over the past year as commodity prices bounced off the lows prevailing early in 2016. The export price index rose by a forecast 6% in Q1, with upside risks, to be around 25% higher than a year ago. That would still have the export price index around 13% below the peak of late 2011.”

“Commodity prices made sizeable gains in the opening quarter of 2017, up 8.5% in AUD terms on the WCFI measure, and posting even stronger gains as measured on the RBA commodity price index. The terms of trade for goods, on these estimates, increases by around 6.5% in the quarter to be 28% above a year ago.”


12:32 South Africa Producer Price Index (MoM) increased to 0.7% in March from previous 0.6%


12:32 South Africa Producer Price Index (MoM): 0.3% (March) vs previous 0.6%


12:32 Latest Opinionway Poll: Macron 60%/Le Pen 40% vs 61%/39% previous

According to the latest outcome of the daily Opinionway poll, Centrist candidate Emmanuel Macron is seen beating far-right candidate Marine Le Pen in the second round of French elections by 60% to 40%, with a gap narrowing a bit from previous 61%-39%.


12:31 South Africa Producer Price Index (YoY): 5.2% (March) vs previous 5.6%


12:30 Dividends season weighing on NOK Danske Bank

The Norwegian Krone could be exposed to some pressures due to the dividends season in the Norwegian stock market, suggested Morten Helt, Senior Analyst at Danske Bank.

Key Quotes

EUR/NOK traded higher yesterday in a move which can be partly explained by oil moving lower and EUR rates moving higher. However, according to our models, the move higher cannot fully be explained by the usual short-term fundamental drivers”.

“Another possible explanation for the NOK depreciation is the dividends season in Norway as DNB ASA is set to pay out roughly NOK5.5bn today, which alone constitutes 23% of total dividends payouts (by far the biggest single share). Of the DNB holdings, 38% are on foreign ownership, which in a thin market could weigh on the NOK if investors now decide to exchange NOK to FX”.

“In our view, the latest NOK depreciation should clearly remove the worst fears of inflation falling further. Imported inflation has explained roughly two-thirds of the move in core inflation over the past year”.

“As the housing market is also cooling amid not least much tight er regulatory measures, it will leave Norges Bank in a more 'normal' situation, indicating a more equally weighted setting of monetary policy”.


12:28 GBP/USD still sees a visit to 1.2950 UOB

FX Strategists at UOB Group still expects Cable to visit the mid-1.2900s in the near term.

Key Quotes

GBP eased off quickly after spiking to a high of 1.2910 early yesterday. Upward momentum is showing signs of waning and this pair has to quickly reclaim 1.2860 or the risk of a short-term top would continue to grow”.

“In other words, while we continue to expect the “UK election” rally to extend to 1.2950, this has to happen quickly as further consolidation at these higher levels would lead to a rapid loss in momentum. Stop-loss for the bullish view is unchanged at 1.2700”.

 


12:21 USD/JPY trims early gains, still holding above 111.00 handle

The USD/JPY pair trimmed some of its early gains and retreated over 30-pips from over 2-week tops touched during early European session.

A slight hint of risk-aversion trade, as depicted by mildly cautious opening in the European equity markets and retracing US treasury bond yields, extended some support to the Japanese Yen's safe-haven appeal. 

Meanwhile, possibilities of traders taking some profits off the table, especially after 250-pips hefty gains in just three trading sessions, could also be one of the factors driving the pair lower. Despite of the pull-back, the pair has held above the 111.00 handle and hence, it would be prudent to wait for a break below the said handle before confirming that the pair might have topped out in the near-term.

Investors on Wednesday will remain focused on the US President Donald Trump's announcement on tax reforms, which would drive sentiment surrounding the US Dollar and provide some fresh impetus ahead of Thursday's BOJ monetary policy decision. 

BoJ to keep its monetary policy unchanged – Danske Bank

Technical levels to watch

A follow through retracement below the 111.00 handle could get extended towards 110.60-55 horizontal support, below which the pair could turn vulnerable to aim back towards retesting the key 110.00 psychological mark.

On the upside, 111.50 area now becomes immediate resistance, above which a fresh bout of short-covering should assist the pair back towards reclaiming the 112.00 handle.


12:18 EUR/USD losses momentum, near 1.0900

The upside bias around the European currency is now losing some traction, pushing EUR/USD back to test the 1.0900 neighbourhood.

EUR/USD gains faltered near 1.0950

After recording fresh 2017 tops in the mid.1-0900s, the pair sparked a correction lower to the current area of 1.0900 the figure amidst some recovery in the greenback.

The risk-on trade has subsided somewhat during the morning in the Old Continent, weighing on EUR and forcing spot to recede from recent tops in the 1.0950 region seen in early trade.

The move is accompanied by a poor performance of yields in the German money markets, retreating from recent multi-day peaks.

Nothing scheduled data wise in Euroland, while the ECB meeting tomorrow will be the salient event for the EUR this week. Across the pond, the weekly report on crude oil stockpiles by the EIA is only due ahead of Thursday’s Durable Goods Orders and Friday’s flash Q1 GDP figures.

EUR/USD levels to watch

At the moment, the pair is losing 0.30% at 1.0901 and a breach of 1.0837 (200-day sma) would target 1.0819 (low Apr.24) en route to 1.0780 (high Apr.20). On the other hand, the next hurdle lines up at 1.0950 (2017 high Apr.26) followed by 1.1000 (psychological handle) and then 1.1300 (high Nov.9 2016).


12:17 Gold: Geopolitical risks to support prices Goldman Sachs

The analysis team at Goldman Sachs suggests that the geopolitical risks should support gold prices, counter-balancing stronger growth and higher rates.

Key Quotes

“Gold has historically been the commodity most exposed to geopolitical risks (it acts as both a safe haven, and a hedge against debasement risk). The recent period of heightened uncertainty has been no exception to this trend, with gold up more than 10% YTD.”

“Following the results of the first round of the French presidential election on Sunday, which saw Mr. Macron and Ms. Le Pen advance to the next round, gold has sold off by $17/oz. As Max Layton has argued, we continue to expect prices to move lower, towards our $1,200/toz forecast. The key catalysts we see for this move will be markets repricing to reflect higher US rates, a faster Fed balance sheet normalization, increased expectations of US tax reform (cuts), and stronger growth (as the hard data catch up to the surveys). However, we also note that prices could remain volatile as significant political uncertainties remain, including the prospect of a US government shutdown (more likely if the current budget debate extends into May) and increased military tensions in North Korea.”

“Ultimately, we remain agnostic on gold over a 12-month horizon. While we see stronger growth, exactly how the Fed responds to this environment (i.e., the path of real interest rates), as well as how geopolitical risks will evolve, remain uncertain.”


11:56 Gold bounces off two-week lows, awaits Trumps tax plan for fresh impetus

Gold managed to recovery early lost ground to two-week lows and has now moved into positive territory, snapping two consecutive days of losing streak.

Currently trading around $1265 level, testing session tops, a slightly cautious opening in the European equity markets extended some support to the precious metal's safe-haven appeal. Adding to this, a sharp retracement in the US treasury bond yields further collaborated to the yellow metal's recovery move from the lowest level since April 11.

   •  Market sentiment has lifted following the first round of the French election - ANZ

The gains, however, were tepid amid renewed optimism surrounding an expected tax reform announcement from the US President Donald Trump, later during the day. Moreover, a modest greenback recovery, with the key US Dollar Index inching back closer to the 99.00 handle, might also keep a lid on additional up-move for the dollar-denominated commodity, gold. 

   •  US Dollar turns positive near 98.80

With an empty US economic docket, the commodity remains at the mercy of broader market risk-sentiment and the USD price-dynamics as investors keenly await details about the US President Donald Trump's promised package to overhaul the US tax code.

Technical levels to watch

Immediate resistance is pegged near $1270 area, above which the metal is likely aim towards $1277-78 horizontal resistance. A follow through momentum beyond $1280 level might trigger a short-covering rally towards $1287-88 resistance ahead of multi-month highs hurdle near $1295 level. 

On the flip side, weakness below two-week lows support near $1260 level could get extended towards the very important 200-day SMA support near $1254 region en-route $1247 horizontal support.


11:47 EUR/USD still seen rangebound near term Danske Bank

Morten Helt, Senior Analyst at Danske Bank, expects the pair to remain sidelined between 1.04 and 1.10 in the short term.

Key Quotes

EUR/USD remains supported by higher EUR interest rates as selling pressure in the European fixed income markets continues, and the cross rallied to a new five-month high at 1.0950 yesterday”.

“While the cross could remain supported going into the ECB meeting tomorrow amid speculation that the ECB could send small signals towards reducing monetary stimulus, we still look for the 1.04-1.10 range to hold in the coming one to three months”.

“We expect a slightly dovish tone from Mario Draghi at the meeting, as the main message should be that the ECB is on autopilot with its current monetary policy”.

“Moreover, we note that the announcement of the Trump administration’s tax plan, which is due today, could be another potential negative for EUR/USD if investors buy in to the plan. Note, however, that the full tax plan will not be released until June, and we still expect Trumponomics to come later and be smaller than pledged due to disagreement within the Republican party”.


11:45 BrexitMin Davis: Will not seek to take divide & rule approach to Brexit negotiations

Livesquawk reports the following headlines from the UK’s Brexit minister David Davis:

Should be under no illusions about scale of the task ahead of us in Brexit negotiations

Will not seek to take divide & rule approach to Brexit negotiations

Favor intelligent approach to regulation in years ahead, avoid unnecessary burdens but ensure new access to markets

 


11:41 EUR/USD turned to bullish, eyes on 1.10 UOB

FX Strategists at UOB Group shifted their outlook on the pair to bullish from neutral, expecting a potential test of the 1.10 handle in the next weeks.

Key Quotes

“The sudden surge that easily took out the Monday’s peak of 1.0935 has shifted the outlook for EUR to bullish. The target is for a move towards the declining weekly trend-line which is currently just above 1.1000”.

“In order to maintain the impulsive momentum, any pull-back should not move back below 1.0830. On a shorter term note, 1.0870 is already a strong level. In view of the overbought conditions, ‘better buying level’ is nearer to 1.0900”.

 


11:33 Saudis OilMin: Interested in continuing dialogue between OPEC, non-OPEC countries aimed at stabilizing oil prices

Saudi Arabia’s energy minister Al-Falih crossed the wires last minutes, via Reuters, noting that the OPEC’s biggest oil producer is Interested in continuing dialogue between OPEC and non-OPEC countries, which is aimed at stabilizing oil prices.


11:27 Canadas Freeland: Confident that Canadian position on lumber trade can be upheld

Canadian foreign minister Christina Freeland crossed the wires last minutes, speaking on the US import tariffs to BBG TV.

Key Points:

Lumber dispute with US is "sadly familiar"

Confident that Canadian position on lumber trade can be upheld

Urges US to "be nice to your clients"

Mentioned trade issues to Ivanka Trump in Berlin


11:24 EUR/GBP upside failed near 0.8530

The upside momentum in EUR/GBP seems to have run out of steam in the proximity of the 0.8530 handle today, easing to the current 0.8510 for the time being.

EUR/GBP boosted by EUR-buying

The European cross is looking to extend the ongoing positive momentum further north of the 0.8500 handle, sparked soon after the results from the first round at the French presidential elections on Sunday.

The single currency remains well bid during the first half of the week amidst the generalized solid tone from the risk-on sentiment and rising optimism on a victory of centrist candidate Emmanuel Macron at the second round on May 7 vs. far-right candidate Marine Le Pen.

The next risk event for the cross will be tomorrow’s ECB meeting and Friday’s advanced GDP figures in the UK during the January-March period.

EUR/GBP key levels

The cross is now gaining 0.07% at 0.8517 and a breakout of 0.8534 (high Apr.25) would aim for 0.8552 (100-day sma) and finally 0.8595 (200-day sma). On the other hand, the immediate support lines up at 0.8488 (20-day sma) seconded by 0.8474 (low Apr.25) and then 0.8448 (low Apr.24).

 


11:21 GBP/USD: Bears target 1.2800 as DXY bounces

The buying interest in the US dollar gathered pace across the board over the last hours, knocking-off GBP/USD sharply towards 1.28 handle.

Cable broke its Asian consolidative mode in early Europe, and came under aggressive selling pressure, mainly driven broad based US dollar rebound, despite a pause in the US yields rally.

Markets prefer to hold the US currency ahead of the Trump administration’s tax overhaul announcement due later in the American. However, the USD bounce may not last longer, as markets already believe that today’s announcement on tax reforms plan could once again lack details.

Moreover, a turnaround in risk condition, with risk-off seeping back into markets amid negative oil and subdued European equities, also added to the renewed downside seen in the spot.

GBP/USD Levels to consider            

A break above 1.2842/ 51 (daily top/ Apr 20 high) could lift the pair above 1.2871 (Apr 24 high), beyond which a test of 1.2912 (flash rally high) is imminent. Conversely, a break below 1.2819 (5-DMA), leading to a subsequent break below 1.2763/58 (10-DMA/ Apr 21 low) is likely to drag the pair towards testing its next support near 1.2722/00 (classic S3/ zero figure).


11:16 AUD/USD slips below 0.75 mark; more pain ahead?

The AUD/USD pair extended mixed Australian CPI-led downslide and has now slipped below the key 0.7500 psychological mark, to its lowest level since April 12.

Earlier during Asian session, the pair's attempted recovery move got sold into near the very important 200-day SMA following the release of Australian inflation figures. A miss on the headline numbers does not warrant any change to the RBA's neutral stance, but was sufficient to attract a follow through selling pressure around the major.

   •  Australia: High yielder status comes into question – TDS

Meanwhile, the ongoing up-surge in the US treasury bond yields helped the key US Dollar Index to reverse early losses and continued driving flows away from the higher-yielding currencies - like the Aussie. 

Also collaborating to the pair's strong offered tone was a mildly weaker trading sentiment around commodity space, especially copper, which derives demand for commodity-linked currencies, including the Australian Dollar. 

   •  Commodities: Signs of increased certainty – Goldman Sachs

It would now be interesting to see if the pair is able catch some fresh bids at lower levels and stage any recovery or additional long-unwinding pressure continues to drive the pair lower even from current levels amid data light US economic docket

Technical levels to watch

Bears would be eyeing for a break through 0.7475-70 immediate support, below which possibilities of stops getting triggered could aggravate the selling pressure and accelerate the slide towards 0.7430-25 horizontal support ahead of the 0.7400 handle.

On the upside, any recovery attempt might now confront immediate resistance near 0.7520-25 area. Further recovery beyond this immediate resistance might now be capped at the very important 200-day SMA strong hurdle near 0.7555-60 region.


11:03 Chinas ForeignMin urges US and S. Korea to remove Thaad Anti-missile defense system

Livesquawk reporting comments from the Chinese foreign minister, urging US and South Korea to remove Thaad Anti-missile defense system.


11:01 Switzerland ZEW Survey - Expectations down to 22.2 in April from previous 29.6


10:59 Commodities: Overall nancial conditions remain supportive for growth and demand Goldman Sachs

Analysts at Goldman Sachs suggest that the overall financial conditions across the globe remain supportive for growth and demand of commodities in the near future.

Key Quotes

“With the Fed already some way into a hiking cycle, and Chinese policymakers raising interbank rates and cracking down on off-balance-sheet lending (including wealth management products), concerns have been raised over tightening credit conditions slowing growth.”

“In the US, our economists estimate that broad financial conditions, which are more illustrative of the underlying conditions for growth than short-term interest rates, have actually eased over 2017. Stronger equities, narrower credit spreads and a softening USD (vs. trading partners) all contributed to this easing.”

“In China, while recent tightening in the interbank market is a potential downside risk to growth, we do not expect it to result in growth dislocations. Further, we have not seen any significant tightening in mortgage rates, or broader interest rates that would substantially affect corporate or household investment (the more relevant credit metrics for metals demand). The ongoing crackdown on off-balance-sheet activity does, however, pose a downside risk to our view, particularly if it results in a greater-than-expected credit slowdown in 2017Q2.”


10:54 NZ: Unlikely that RBNZ will hold off on hikes for long - Westpac

The analysis team at Westpac, points out that in February, the Reserve Bank’s of NZ projections assumed that the Official Cash Rate would remain on hold until 2019, but with inflation already at levels that the RBNZ wasn’t expecting to see for another three years, it now seems unlikely that they will hold off on hikes for that long.

Key Quotes

“We had previously pencilled in the first OCR hike for early 2019, which is on the later side of the range of market forecasts. But that timing will be under review in coming weeks, as part of a broader review of our forecasts.”

“However, even though rate hikes are likely to come a bit sooner than we had previously been factoring in, we still expect that the OCR will be adjusted at a fairly gradual pace. Much of the recent pickup in inflation has been due to temporary factors, with the impact of recent weather related food price increases and last year’s petrol price gains set to fade over time.”

“What matters for the RBNZ is whether there are signs of a sustained lift in medium term inflation pressures. And that will require an extended period of strong domestic activity. It’s true that we have seen some positive signs in terms of domestic activity. But there are a couple of important things to keep in mind. First, New Zealand’s population is currently growing at some of the fastest rates we’ve seen since the 1970s. That alone should mean that we see firmer growth. It also means that we have a greater capacity to grow without a significant increase in inflationary pressures.”

“Next, and importantly for the RBNZ’s policy stance, much of the strength that we’ve seen in both economic activity and inflation has been underpinned by earlier reductions in interest rates. But the argument runs in both directions: earlier interest rate hikes could see the momentum in activity and inflation fading quickly. In fact, we’ve already seen the housing market cooling in response to the lift in longer-term interest rates since late 2016.”

“This means that to ensure there is enough momentum in activity to generate the lift in inflation that they are looking for, the RBNZ will need to keep the OCR at low levels for some time yet. The RBNZ will also be wary of adding to the upside pressure on the NZ dollar.”


10:50 Commodities: Signs of increased certainty Goldman Sachs

The analysis team at Goldman Sachs suggests that while the recent sell-offs may raise some doubts that we are heading back into a regime of high commodity volatility, with little diversification benefits, the numbers do not bear this out.

Key Quotes

“Both cross-commodity and cross-asset (commodities vs. equities, bonds or FX) correlations remain comparable with those seen in the 1990s/early-2000s.”

“We believe this is a direct result of reduced uncertainty around long-term prices, due to increased confidence in resource bases. In the past, oil supply uncertainty was a question of which technology would be used to create the marginal barrel. Now, the only remaining uncertainty is the exact cost of shale extraction, giving a much narrower range of long-term price forecasts. This certainty around long-term prices also greatly increases the likelihood that sovereign oil producers will hit their budget targets, reducing the need to save or borrow US Dollars. Less excess savings or borrowings put less oil-correlated price pressures on the Dollar, US rates and Dollar-denominated credit, reducing cross-commodity and cross-asset correlations.”

“As long-term supply certainty stabilizes long-term prices, demand is left as the primary focus for the market. As already noted, once the level of demand begins to exceed the level of supply, we start to see sustained periods of backwardation (positive carry) emerging. As a result, we maintain our overweight recommendation on commodities, with a 12-month-ahead forecast for the enhanced S&P GSCI at +9%, with roll yield (backwardation) accounting for around half of this return.”


10:42 NZ: Inflation to remain around 2% through the remainder of 2017 - Westpac

The research team at Westpac explains that there has been a marked turnaround in New Zealand’s inflation environment in recent months as after lingering below the Reserve Bank’s 1 to 3% target band for much of the past two years, inflation jumped higher in the March quarter, with the annual rate climbing to 2.2%.

Key Quotes

“This is the first time that inflation has been above the Reserve Bank’s 2% target midpoint since September 2011.”

“Underlying much of the pick-up in inflation have been two big factors. First, the early part of 2017 saw strong increases in the prices of some fresh produce, such as apples and carrots. Those increases were related in part to climatic conditions. And with poor weather continuing in March and April, we're likely to see some further weather impacts on prices in the June quarter also.  Nevertheless, this still represents only a temporary boost to inflation.”

“Second, petrol prices have risen over the past year in response to higher global oil prices, and they are currently around 12% higher than this time last year.”

“Both food and fuel prices can be volatile, with factors unrelated to the strength of domestic economy causing sharp swings (such as unseasonable weather conditions). However, even outside of these categories we’ve been seeing a firming in New Zealand’s inflation environment.  That’s been reflected in the various measures core inflation which track the underlying trend in price movements, and which have been rising steadily since mid-2016.”

“On top of this, there were a number of import-heavy areas – clothing, used cars, electronic goods – where prices didn’t fall as much as expected in March. This could be a sign that firm domestic demand combined with a fall in import prices is allowing retailers to rebuild their margins. Recent business surveys have shown that retailers have become more optimistic about their ability to raise prices. If that’s the case, it could mean a bit more persistence in the inflation outlook than we previously thought.”

“Following the stronger than anticipated March quarter result, we now expect that inflation will remain around 2% through the remainder of 2017. That's a markedly stronger outlook for inflation than the Reserve Bank was expecting back in February when it released its latest set of projections. That will go a long way in terms of removing downside risks for inflation expectations, which had been a major bugbear for the RBNZ in recent years. It will also reinforce the outlook for wage inflation over the coming year, with higher costs of living adjustments and firm domestic activity expected to boost wage claims through 2017 and 2018.”


10:42 EUR/USD retreats from yearly tops as USD selling abates

The greenback selling interest seems to have abated, with the EUR/USD pair reversing majority of its early gains to yearly tops near mid-1.0900s and refreshing session lows near 1.0915 region.

Continuous up-surge in the US treasury bond yields, amid renewed optimism around the US President Donald Trump's expected tax reforms announcement, helped the key US Dollar Index to bounce off lows and prompted traders to take some profits off the table. 

With markets pricing-in Emmanuel Macron's victory in the second round on May 7, investors also seemed to lighten their bullish bets heading into the key ECB monetary policy decision on Thursday, especially after the post-French election up-surge of over 200-pips. 

With no relevant fundamental drivers, in-terms of market moving economic releases from Euro-zone or from the US, market participants keenly await details over Trump's promised package to overhaul the US tax code, expected to be announced later during the day.

Technical levels to watch

Immediate support is pegged at the 1.0900 handle, below which the pair is likely to extend the corrective slide towards the very important 200-day SMA support near 1.0850-40 region before eventually breaking below 1.0800 mark and head towards testing a previous resistance, now turned support near 1.0775-70 area.

On the upside, mid-1.0900s now seems to have emerged as immediate strong hurdle, which if conquered should pave way for continuation of the pair’s near-term upward trajectory, initially towards the key 1.1000 psychological mark ahead of 1.1025-30 horizontal resistance. 


10:37 Australia: High yielder status comes into question TDS

In view of the analysts at TDS, if the RBA sits tight while the Federal Reserve continues to hike, then Australia’s status as a high yielder comes into question. 

Key Quotes

“Aside from the occasional outsized maturity (e.g. the June 2016) net bond flows offshore tend to be positive.”

“While consensus claims that benign underlying inflation stays the RBA’s hand, we can’t ignore the fact that Australia’s safe high yielding status could be at risk.  Losing global investor appeal during the AOFM’s bloated bond issuance program ($A100b for 2-3 years) could see the share of offshore bond ownership shrink towards (say) 30%, placing heavy medium term downside on the Australian dollar.”

“While the RBA is of the view that a lower Australian dollar would be beneficial for the economy, the Bank is highly unlikely to want to repeat a 2008-style sharp correction in the exchange rate due to unexpected capital outflows.”

“Higher ACGB yields via expectations of a tightening cycle (globally and domestically) could entice global investors to step back into the ACGB market.  In contrast, rising ACGB yields via capital outflows and losing AAA via deteriorating fiscal fundamentals could keep investors on the sidelines.”


10:30 US Dollar turns positive near 98.80

The greenback, when measured by the US Dollar Index (DXY), is finally seeing some light at the end of the tunnel, now coming back to the positive territory around 98.80.

US Dollar finds support near 98.50

The index is retreating for the third consecutive week so far, trading in levels last seen in early November around the mid-98.00s, always amidst a renewed and strong comeback of the risk-on trade to the global markets.

Markets’ appetite for riskier assets have intensified following Macron’s win at the first round of the French presidential elections on Sunday, and the upbeat tone appears poised to extend as investors (and election polls) continue to see the centrist and pro-EU candidate winning the second round on May 7 over far-right candidate Marine Le Pen.

Nothing interesting from the US docket so far this week, while markets seem more entertained by what Trump achieved or failed at during his first 100 days in office.

Data wise today, the EIA will publish its weekly report on crude oil inventories ahead of tomorrow’s Durable Goods Orders and Friday’s more relevant advanced GDP figures for the first quarter.

US Dollar relevant levels

The index is up 0.08% at 98.80 and a break above 99.02 (200-day sma) would aim for 99.20 (23.6% Fibo of the April drop) and finally 99.24 (high Apr.24). On the flip side, the next support aligns at 98.61 (low Apr.26) seconded by 98.56 (2017 low Apr.25) and then 96.94 (low Nov.4 2016).

 


10:14 USD/JPY jumps to over two-week highs on reviving risk appetite

The USD/JPY pair built on previous session's hefty gains and has now jumped to near 2-1/2 week tops, around mid-111.00s.

Global risk-on trade, on relief over the first round of the French Presidential election, continued weighing on the Japanese Yen's safe-haven appeal and assisted the pair to prolong its ongoing recovery move for the third consecutive session. 

Moreover, surging US treasury bond yields, amid renewed optimism on expected tax reforms announcement by the US President Donald Trump on Wednesday, helped the key US Dollar Index to reverse early losses and further collaborated to the pair's strong up-move to the highest level since April 10.

With an empty US economic docket, readjustment trade is likely to be a dominant theme, ahead of Thursday's BOJ monetary policy decision, and might eventually result into some volatile price-action later during the day. 

   •  BoJ to keep its monetary policy unchanged – Danske Bank

Technical levels to watch

On a sustained move beyond 111.50 level, a fresh bout of short-covering is likely to lift the pair beyond 111.80-85 resistance towards reclaiming the 112.00 handle. On the downside, any retracement back below 111.30-25 immediate support now seems to attract fresh buying interest near the 111.00 handle, below which the pair is likely to head back towards 110.60 important horizontal support.


10:08 RBNZ: Market fully pricing rate hike by Mar-18 - Westpac

Imre Speizer, Research Analyst at Westpac, explains that the market pricing for the RBNZ has firmed during the past week, now fully pricing a rate hike for March 2018 (from May 2018 previously).

Key Quotes

“The main catalysts for this repricing were the upside surprise from NZ’s Q1 CPI release, and waning global risks. We see the effect of the former as persisting for some time, not least because there is an RBNZ MPS on 11 May.”

“NZ CPI inflation at 2.2% annual is well above the RBNZ’s 1.5% forecast. While some of the causes for the rise are temporary (food, fuel) a significant upgrade to the RBNZ’s inflation forecasts is likely at the MPS. In addition, the NZD TWI is 4% below the RBNZ’s forecast. The monetary policy implication of these surprises in unambiguously hawkish, and we will be very interested in how the OCR projection is shifted (time or value or both?)”


10:01 Sweden Consumer Confidence (MoM): 103.4 (April) vs 102.6


09:56 Australias Q1 CPI is consistent with the RBA s profile - ANZ

Analysts at ANZ Bank are out with their responses on the latest Australian CPI report released earlier today.

Key Highlights:

Q1 CPI data provides confirmation that inflation has stabilised and is creeping toward the policy target band

Headline CPI is now above 2% y/y, but core inflation remains softer.

The average of the two core measures rose 0.4% q/q - in line with the previous two quarters -but the ANZ diffusion index continues to point to soft price pressure across a broad range of items.

The data is consistent with the RBA's profile and, as such, has no policy implications

While the Q1 data suggest that core inflationary pressures have stabilised (it is the third consecutive 0.4% quarterly outcome), the underlying price pulse remains weak. The ANZ Diffusion index remains low, with just 34% of the basket rising by more than 2.5% annualised in Q1


09:46 France Consumer Confidence meets forecasts (100) in April


09:43 NZD/USD well-offered for third straight session, hits fresh two-week lows

The NZD/USD pair remained under some selling pressure for the third consecutive session and has now dropped to fresh two-week low near 0.6920-15 region.

Spot extended its rejection move from 50-day SMA important hurdle and is being weighed down by surging US treasury bond yields, which tends to drive flows away from higher-yielding currencies - like the Kiwi. 

   •  Treasury yields rise as Fed rate hike bets rise

The pair even shrugged off upbeat NZ credit card spending data and subdued US Dollar price-action, with the US bond yield dynamics being an exclusive driver of the pair's ongoing downslide to the lowest level since April 12.

It, however, remains to be seen if the pair continues with its downward trajectory or is able to find some buying interest near the 0.6900 handle amid prevalent risk-on environment and absent fundamental drivers, in-terms of any major market moving economic releases.

Meanwhile, investors would remain focused on the US President Donald Trump's promised big announcement on tax reforms, expected later during the day.

Technical levels to watch

Weakness below 0.6909 level (April 12 low) could get extended towards 0.6895-90 support, below which a fresh leg of weakness is likely to drag the pair towards 0.6860-40 intermediate support en-route the 0.6800 handle.

On the upside, any recovery attempts might now confront immediate strong resistance near 0.6955-60 area, which if cleared is likely to lift the pair back towards 0.6985-90 area before eventually lifting it beyond the key 0.70 psychological mark towards retesting 50-day SMA important hurdle near 0.7025-30 region.


09:35 Consensus still divided on CBRT decision today TDS

Annette Beacher, Macro Strategist at TD Securities, noted the opinions on today’s interest rate decision by the Turkish central bank (CBRT) stay quite divided.

Key Quotes

“There is a lot of uncertainty surrounding today’s CBRT rate announcement. Whether the MPC decides to keep all rates unchanged or hikes the Late Liquidity Window (LLW) rate by, say, 50bps to 12.25% is anybody’s guess; consensus expectations are more or less evenly split”.

“We inclined to go for no change in the LLW, but have nearly as many reasonable arguments in favour of a hike. The chief reason why we believe that the CBRT could decide to hold is that the decision is never entirely free from political influence”.

“This time, after the successful referendum on the constitutional reform, is probably no exception. Chief advisors to President Erdogan have already started to anticipate lower rates, which is an expectation we also have for the future”.

“But with the WACF only 25bps below the hard ceiling of the LLW, we may see a repeat of the 16 March announcement (when the WACF–LLW differential had shrunk to 20bps) when the CBRT hiked 75bps. So we think today’s decision is near a coin toss. As for policy rates other than the LLW, we are highly confident that none will be changed; this is in line with the consensus”.


09:33 Turkey: Lot of uncertainty surrounding todays CBRT rate announcement - TDS

The research team at TDS points out that there is a lot of uncertainty surrounding today’s CBRT rate announcement on whether the MPC decides to keep all rates unchanged or hikes the Late Liquidity Window (LLW) rate by, say, 50bps to 12.25% is anybody’s guess; consensus expectations are more or less evenly split. 

Key Quotes

“We inclined to go for no change in the LLW, but have nearly as many reasonable arguments in favour of a hike. The chief reason why we believe that the CBRT could decide to hold is that the decision is never entirely free from political influence. This time, after the successful referendum on the constitutional reform, is probably no exception.”

“Chief advisors to President Erdogan have already started to anticipate lower rates, which is an expectation we also have for the future. But with the WACF only 25bps below the hard ceiling of the LLW, we may see a repeat of the 16 March announcement (when the WACF–LLW differential had shrunk to 20bps) when the CBRT hiked 75bps. So we think today’s decision is near a coin toss. As for policy rates other than the LLW, we are highly confident that none will be changed; this is in line with the consensus.”


09:28 GBP/USD challenging daily lows near 1.2830

The demand for the Sterling appears somewhat depressed on Wednesday, now dragging GBP/USD to test lows in the 1.2830 region.

GBP/USD upside still capped at 1.2900

After reaching fresh YTD tops just above the 1.2900 handle last week, spot retraced part of the up move and has been attempting to consolidate within a 1.2750/1.2870 range since then.

No relevant news from the Brexit front left the bulk of the price action to be determined by USD-dynamics and the broader risk appetite trends, particularly after the results from the first round at the French elections on Sunday.

Looking ahead, UK’s advanced GDP figures for the first quarter are due tomorrow, while the DoE’s weekly report on crude oil supplies is due later today in the US docket.

GBP/USD levels to consider

As of writing the pair is losing 0.07% at 1.2832 and a breakout of 1.2871 (high Apr.24) would open the door to 1.2909 (high Apr.18) and then 1.3000 (psychological handle). On the other hand, the immediate support aligns at 1.2758 (low Apr.21) followed by 1.2613 (200-day sma) and finally 1.2601 (20-day sma).

 


09:25 WTI looks to stabilize near $ 49.50 ahead of EIA report

Oil futures on NYMEX consolidate the Asian recovery near the mid-point of 49 handle, looking to stabilize after the overnight drop, in the wake of bearish API inventory report.

The API data showed that the US crude oil inventories rose by 897,000 barrels in the week to April 21 to 532.5 million barrels. Markets were expecting a draw of 160,000 barrels.

The black gold remains under pressure amid resurfacing oversupply concerns, in the wake of record high US supplies and uncertainty over the extension of the OPEC oil production cut deal beyond June this year.

On Tuesday, oil prices staged a rebound from monthly lows on expectations of drawdown in the API weekly crude stockpiles report, and also on the back of profit-taking.   

Focus now remains on the official US government figures on crude reserves due to be published by the EIA later today. Also, the Trump administration’s announcement on the tax reforms plan will have some impact on the USD-sensitive oil.

WTI technical levels 

A break above $ 49.83 (Apr 25 top) could yield a test $ 50.38 (classic R2/ Fib R3) beyond which $ 50.65 (50-DMA) could be tested. While a breach of $ 49.03 (4-week lows) would expose the 48.76/75 (classic S1/ Fib S2), below which downside opens up for a key support at $ 48.


09:15 USD/CAD digesting yesterdays strong move to 14-month tops

The USD/CAD pair seesawed between tepid gains / minor losses and remained confined within a narrow trading range below 14-month tops touched in the previous session. 

The Canadian Dollar remained under intense selling pressure for the second straight session on Tuesday on concerns over the US President Donald Trump's plans to impose duties on soft lumber imports from Canada. The worries further escalated after Trump stated his intensions for a similar tax on the Canadian dairy industry.

   •  Canada’s PM Trudeau tells Trump that Canada will vigorously defend interests of softwood lumber industry

On top of it, the prevalent bearish sentiment around oil market further collaborated to the pair's up-surge beyond the 1.3600 handle. Meanwhile, a late recovery in WTI crude oil prices prompted some profit-taking, with the pair fading around 60-pips from the highest level since Feb. 2016. 

A follow through retracement on Wednesday could be attributed to a subdued US Dollar price-action as market participants eagerly wait for Trump's big announcement on tax reforms. However, softer oil prices did little to extend any further support, with the pair reversing minor losses to currently trade nearly unchanged around 1.3570 region. 

Later during NA session, Canadian monthly retail sales data would now be looked upon for some fresh impetus and immediate respite for the Canadian Dollar. From the US economic docket, the weekly crude oil inventories data by EIA would also be in focus and should influence the commodity-linked currency – Loonie. 

Technical levels to watch

A follow through retracement below mid-1.3500s is now likely to find immediate support near 1.3525-20 area and is closely followed by an important psychological mark support at the 1.35 handle. On the flip side, momentum back above the 1.3600 handle now seems to lift the pair beyond 1.3625 area (yesterday's high) towards testing 1.3640-45 resistance en-route its next major hurdle near 1.3670-80 region.


09:10 Turkey: TCMB to keep its benchmark repo rate at 8.00% - Danske Bank

Analysts at Danske Bank suggests that it’s a rate decision in Turkey today as the Turkey's central bank (TCMB) is due to announce its monetary policy decision.

Key Quotes

“We expect the TCMB to keep its benchmark repo rate at 8.00%, avoiding extra pressure on the banking and corporate sector as TRY has stabilised. Yet, as inflation remains in the double-digit territory, we expect the late liquidity lending rate to be hiked by 25bp to 12.00%. Consensus median has the rate staying unchanged.”


09:02 Switzerland UBS Consumption Indicator remains at 1.5 in March


08:58 NZ: Monthly net migrant arrivals held firm in March near all-time highs - ANZ

Phil Borkin, Senior Economist at ANZ, explains that the monthly net migrant arrivals held firm in March near all-time highs for New Zealand.

Key Quotes

“We can’t see that picture changing much, at least for some time. Although migration is now increasingly in the political spotlight, recent visa requirement changes are unlikely to have a noticeable impact for some time yet.”

“Seasonally adjusted visitor arrivals rebounded after falling in February. The underlying trend has admittedly flattened. But with key events (the World Masters Games that got underway in Auckland last weekend and the British and Irish Lions rugby tour just around the corner), we expect to see decent arrivals figures over the coming months.”

Key Points

  • At 6,100, the seasonally adjusted net migrant inflow remained strong in March, and close to all-time highs. Net inflows have effectively held around this level for the past six months now, lifting the annual total close to 72k – or over 1½% of the resident population. 
  • After rising to the highest level since mid-2014 in February, permanent and long-term (PLT) departures fell sharply in March. We weren’t convinced that the prior lift was the start of a new trend, and today’s data shows we were right to be sceptical. In seasonally adjusted terms, PLT departures fell 6.7% m/m in March. PLT arrivals also fell, but only modestly so, and on an annual basis, the story remains unchanged, with the 129.5k arrivals dominated by those on work visas (34%), NZ & Australian citizens (29%) and students (18%), although the latter continues to ease. 
  • Seasonally adjusted visitor arrivals rose 1.5% m/m sa, reversing February’s dip. Annual growth is now flat, but that reflects contrasting signals from lower Australian arrivals (perhaps related to the timing of school holidays) and strong growth from the likes of the US, Europe (ex UK) and some Asian nations. Chinese arrivals are up 4% y/y. 
  • The broader trend in arrivals has moderated. More than anything that probably reflects capacity issues. However, we expect ongoing lifts in arrivals numbers over the coming months supported by the lift in the weekly China-NZ flight cap and due to key events (the World Masters Games and British and Irish Lions rugby tour).”

08:53 BoJ to keep its monetary policy unchanged Danske Bank

Analysts at Danske Bank expect the Bank of Japan (BoJ) to keep its monetary policy unchanged at its policy meeting ending early Thursday morning.

Key Quotes

“This means that the BoJ will maintain its QQE and YCC with a target for the 10-year Japanese government bond yield of around 0%. This should not be a source of significant price action as this view is widely expected in the market. We still see USD/JPY in the 108-112 range in the near term.”


08:52 Forex Today: AUD weaker on Aus CPI, eyes on US tax reforms announcement

Risk-on trades dominated the Asian markets, after a strong performance seen on the Wall Street and amid higher treasury yields. The Japanese yen remained under pressure in the wake of increased demand for risk assets, while the Aussie stalled its recovery mode and fell back into the red following the release of the Australian Q1 CPI report, which revealed a mixed picture of the consumer spending. The EUR/USD pair maintained its bullish streak amid a broadly subdued US dollar, while the Kiwi ran through fresh supply during late-Asia, despite risk-on and upbeat NZ credit card spending data.

Heading towards the European opening bells, the immediate focus remains on the Swiss UBS consumption indicator, while the EUR calendar remains absolutely data-dry. Later today, the NA session offers the Canadian retail sales data and US EIA crude oil inventories report. Apart from the data releases, the Trump administration’s announcement on the impending tax reforms plan will hog the limelight and shape up next direction in the US dollar.

Main topics in Asia

Trump's administration plans to tax repatriation of corporative foreign earnings at 10%

According to Livesquawk, U.S. President Donald Trump's administration plans to tax repatriation of corporative foreign earnings at 10%.

Canada’s PM Trudeau tells Trump that Canada will vigorously defend interests of softwood lumber industry

Reuters reporting statement from the Canadian PM Trudeau’s office, directed to theUS President Trump, in the wake of yesterday’s reports that the Trump administration plans to impose 20% tariffs on soft lumber imports from Canada.

US Comm Sec Ross: Trump administration mulls more trade actions - WSJ

The US Commerce Secretary Wilbur Ross said in a WSJ interview late-Tuesday that The Trump administration is considering launching trade actions to protect the US aluminum, semiconductor and shipbuilding industries.

Australia's Q1 2017 CPI: Headline misses expectations

Following the sluggishness seen in Australia's Q4 2016 CPI readings, today's inflation figures for the Q1 2017 showed a mixed picture, with the headlines numbers missing expectations. 

Gold drops to Feb high on broad based risk-on

Gold prices dropped to the February high of $1263 levels as the major US equity indices neared record highs, while the treasury yields jumped to two-week highs.

Key Focus ahead

EURUSD: Prefer to buy dips

The Euro has had a strong session in reaching 1.0949, and looks as though it could head higher still over the next few sessions although the 4 hour charts are now approaching overbought extremes, so some caution is warranted on the topside, particularly in view of Donald Trump’s impending tax announcement…

GBP/USD Forecast: eyeing a fresh bullish break-out above 1.2850

The US Dollar remained under some pressure against its key European counterparts, with both the GBP/USD and the EUR/USD major consolidating overnight gains. There are no macroeconomic data due for release on Wednesday and hence, markets would eagerly wait for Trump's big announcement on tax reforms.

FX Traders Hang Hope on Trump as USD, EUR Soar

Forex traders are not the only ones hanging their hopes on Donald Trump, who plans to make a big announcement on tax reform on Wednesday. 

BOJ to keep its policy stance intact on Thursday - Barclays

FX Strategists at Barclays provide their insights on what to expect from Thursday’s BOJ monetary policy review.

BBG Survey: US Q1 GDP seen bouncing back but not reaching Trump’s target

According to a Bloomberg Survey of economists, the US GDP probably expanded at 1% annualized rate in Q1 2017.

 


08:50 Euro crosses slippy to the topside Deutsche Bank

The analysis team at Deutsche Bank explains that the perceived gamma exposure was net shorter to the topside in most euro crosses ahead of the ECB.

Key Quotes

“In EUR/USD and EUR/JPY shorts have been added to above spot giving rise a mildly slippy pocket from +2% of spot. In other euro crosses, topside shorts have been extended in EUR/SEK but pared in EUR/CHF. In the sterling crosses, longs have been pared above spot in GBP/USD and around spot in EUR/GBP. In the yen crosses, shorts have been added to below spot in USD/ JPY but neutralized around spot in AUD/JPY. Elsewhere in the dollar-bloc, longs have been added to in the lower delta strikes in USD/CAD and NZD/USD and in both directions in AUD/USD.”

“In USD/LatAM, the market appears to be longer gamma below spot, and shorter above spot in USD/MXN. USD/Asia is little changed, other than addition of longs above spot in USD/TWD, and paring of gamma exposure around spot in both USD/INR and USD/KRW. Elsewhere in CEEMEA, longs have been pared around spot in EUR/HUF, whilst shorts have been added to below and around spot in USD/TRY.”


08:39 Australia: Consumer confidence declines for the second week in a row - ANZ

The research team at ANZ explains that Australia’s consumer confidence extended its losses for a second week, with the headline index falling 1.24% to 111.2 - below its long run average.

Key Quotes

“Households’ views towards their current finances fell 1.2% on a weekly basis, while views about future finances fell 0.6%.”

“Households’ expectations for economic conditions next year registered the sharpest drop, a fall of 5.3% taking the index to its lowest level since February 2016. Expectations for economic conditions over the next five years rose slightly by 0.2%, but are still close to the lowest level for 2017.”

“The ‘good time to buy a household item’ index fell by 0.2%, after a sharp drop recorded last week.”

“Inflation expectations were unchanged at 4.3%, with the four week moving average holding steady at 4.3%.”

“ANZ’S Head of Australian Economics David Plank Commented:

“Most of the fall in consumer confidence was driven by expectations for economic conditions over the coming year. These are now the lowest they’ve been since early 2016, before the RBA resumed its easing cycle. While longer-term expectations gained slightly, they are still close to their lowest level for the year. We think continued low wage growth is likely behind the weakness in these categories. Rising geopolitical risks might also have fed into households’ concerns about the outlook.

The weakness in consumer sentiment stands in contrast to the more optimistic outlook of firms and the very high level of reported business conditions. The strong March employment figures were consistent with this bullish business sentiment. It is possible that we are in for a period of stronger job reports that further close the gap between the official figures and what surveys such as ANZ job ads and NAB business conditions are telling us. This may be enough to prevent a further decline in consumer sentiment. But we doubt we will see a sustained improvement until income growth picks up.”


08:37 EUR/USD testing 2017 highs near 1.0950

The risk-on sentiment stays unabated so far this week, now pushing EUR/USD to print fresh YTD tops in the mid-1.0900 ahead of the opening bell in Euroland.

EUR/USD firmer ahead of ECB

The pair keeps its march north well and sound during the first half of the week, always against the backdrop of solid risk-on trade and a persistent decline of the greenback.

The optimism around the European currency is not giving signs of exhaustion yet despite market participants seem to have already digested the results from the recent first round at the French elections and a victory of Macron over Le Pen at the second round on May 7 appears almost fully priced in.

On the USD side, traders continue to unwind long positions, forcing the US Dollar Index (DXY) to break below the critical 11-month support (now resistance) line, currently around 98.80 and intensify its bearish note.

In the data space, nothing noteworthy in the Old Continent, whereas the weekly report on US crude oil inventories by the EIA is due later in the NA session.

EUR/USD levels to watch

At the moment, the pair is gaining 0.10% at 1.0945 facing the next hurdle at 1.0950 (2017 high Apr.26) followed by 1.1000 (psychological handle) and then 1.1300 (high Nov.9 2016). On the flip side, a breach of 1.0837 (200-day sma) would target 1.0819 (low Apr.24) en route to 1.0780 (high Apr.20).


08:33 Forsa Poll on German election: CDUs Merkel continues to lead

The latest poll on German election conducted by the Forsa Institute, showed that Merkel continues to maintain her lead for the German leadership.

Key Details:

CDU/CSU 36%

SPD 30%

AFD 9%

Linke 8%

Greens 7%

FDP 6%

Others 4%


08:33 AUD/USD off lows, defends 0.75 handle for the time being

The AUD/USD pair remained under some selling pressure, albeit has managed to bounce-off from the vicinity of key 0.75 psychological mark and is currently trading around 0.7520 region.

The pair on Wednesday was being weighed down by disappointing release of Australian quarterly CPI print, coming-in at 0.5% q-o-q as compared to 0.6% expected. Meanwhile, the yearly rate moved above 2% for the first time since Q2 of 2014 and helped limit losses. 

Also collaborating to the tepid reaction was the trimmed mean CPI, RBA's core inflation figure, which printed better-than-expected reading of 1.9% y-o-y vs. 1.8% expected and 1.6% previous. 

   •  Australia: Headline inflation back in the band, AUD remains capped - Westpac

Despite of a slight miss on the headline CPI print, the pair has managed to hold its neck above 0.75 mark amid prevalent risk-on environment. However, the ongoing up-surge in the US treasury bond yields should continue to lid any sharp recovery for higher-yielding currencies - like the Aussie. 

In absence of any major market moving economic releases, broader market risk sentiment and the US bond dynamics would continue to be key determinants of the pair's movement on Wednesday.

Technical levels to watch

Bears would be eyeing for a decisive weakness through the 0.7500 handle, below which the pair is likely to accelerate the slide towards 0.7475-70 strong horizontal support en-route 0.7430-25 horizontal support.

On the upside, any recovery attempt now seems to confront strong hurdle near mid-0.7500s (200-day SMA), which if cleared might trigger a short-covering rally towards 0.7580-85 intermediate resistance ahead of the 0.7600 handle (50-day SMA).


08:11 Market sentiment has lifted following the first round of the French election - ANZ

Analysts at ANZ points out that the market sentiment has lifted following the first round of the French election, with positive US company earnings and solid data also helping.

Key Quotes

“The EUR and asset markets have pushed higher, with the slight underperformance in the vote for National Front candidate Marine Le Pen (21.5%) boosting confidence that the anti-EU vote is not gaining sufficient traction to cause an upset in the second round of voting on May 7. That potentially may have implications for the anti-EU vote in other member states. Macron is expected to win 60-63% of the second round vote.”

“Overnight positive earnings from large multinationals lifted US equities, helping the MSCI All-Country Index and Nasdaq both push to all-time highs. US treasuries rose 4-6bps across the curve. The US 2 year auction drew strong demand with bidto-cover at the highest level since May 2016. In Europe the curve bear steepened, with 30 year yields up 5 to 9 bps. Commodity prices headed higher driven by softs and oil. Gold prices declined as risk sentiment improved.”


08:08 Australia: CPI off the floor and on track for the RBA TDS

The research team at TDS notes that Australia’s Q1 core CPI rose by +0.43%/qtr and +1.76%/yr, a hair weaker than expected (mkt 1.8%, TD 1.89%) but entirely consistent with the RBA’s target of 2%/yr by mid-year.

Key Quotes

“The markets saw a soft report with headline at +0.5%/qtr and weighted median at +0.4%/qtr, both being a pip weaker than expected. The AUD sunk to $US0.751 and 3yr bond yields eased from 1.86% to 1.84%.”

“As inflation is well off its lows—and the RBA is the most upbeat on the global economy as its been in years—we expect cash rates to follow in due course.”


08:05 US: Economic data showed some signs of moderation - ANZ

The research team at ANZ notes that the US data showed some signs of moderation overnight, although outright levels remain elevated suggesting the economy continues to expand at a moderate pace.

Key Quotes

“April consumer confidence dipped to 120.3, with both the present situations and expectations indices falling. The fall only partly reversed the surge in March, with the headline index still close to a 16-year high. The details point to a strong labour market with respondents saying that jobs are plentiful rather than hard to find remaining close to a 16-year high (11.7 vs last 12.8). Inflation expectations remained stable at 4.7%. Elsewhere, new home sales were at 621k on an annualised basis, from 584k the previous month. The housing market continues to signal healthy overall economic conditions as demand remains strong despite reduced affordability due to higher interest rates and prices.”

“Finally, the Richmond Fed manufacturing index was at 20 (mkt: 16; last: 22). The number of employees dropped to 5, from 20, while the work week fell to 8, from 21, driving the moderation in the business assessment. Additionally, shipments rose to 25, from 17; new orders remained at 26; and wages were steady at 21. Earlier in the week, the April Dallas Fed manufacturing activity index held up well at 16.8. The new orders rose sub-index to 11.5 (9.5) and the number of employees was stable at 8.5 (8.4).”


07:59 FX option expiries for today NY cut

FX option expiries for today NY cut at 10:00ET, via DTCC, can be found below. 

EURUSD: 1.0800 (EUR 465m) 1.0850 (500m) 1.0880 (380m) 1.0900 (1.1bln) 1.0930 (385m) 1.0950 (345m) 1.1000 (1.1bln) 1.1050 (415m)

USDJPY: 110.00-10 (2.6bln) 110.45-55 (1.4bln) 112.70-80 (300m) 113.00 (1.4bln)

GBPUSD: 1.2800 (GBP 227m) 1.2830 (180m) 1.2850 (220m)

USDCHF: 1.0000 (USD 175m)

AUDUSD: 0.7500 (AUD 310m) 0.7550 (260m) 0.7600 (265m) 0.7620 ( 450m)

USDCAD: 1.3500 (USD 500m) 1.3600 (240m) 1.3705 (500m)

NZDUSD: 0.7000 (NZD 236m)

EURJPY: 121.00 (EUR 265m)


07:45 BBG Survey: US Q1 GDP seen bouncing back but not reaching Trumps target

According to a Bloomberg Survey of economists, the US GDP probably expanded at 1% annualized rate in Q1 2017.

Key Quotes:

“As some transitory drags dissipate, economists project a second-quarter rebound similar to the pattern of the past three years”.

“Beyond the quarterly gyrations and a surge in optimism, annual estimates show just 2.2 percent to 2.3 percent growth through 2019, a tad above the average pace during the almost eight-year expansion.”

“While consumer spending will keep underpinning a moderately growing economy, Trump’s goal of 3 percent to 4 percent sustained expansion looks increasingly out of reach.” 

 


07:44 US: Longevity and income BBH

Analysts at BBH explain that Americans do not like to talk about class as many like to think that there are no classes in the US and that sufficient hard work and one's socio-economic status can be raised.  

Key Quotes

“These days, discussions of the disparity of wealth and income are acceptable ways to talk about class.”

“There are various studies that suggest such mobility is becoming more difficult.  A college degree no longer guarantees a secure middle-class living and lifestyle. Moreover, household income is a strong indicator of a range of life opportunities.  In addition to consumption patterns, the location of residence, and marriage opportunities, income appears to also shape life expectancy.”

50-year American men, whose income places them in the lowest 20%, are expected to live just past 76 years.  This is six months less than the previous generation.  On the other hand, 50-year old American men who are in highest quintile in terms of income live to nearly 89, which is seven years more than the previous generation.”  

Previously, wealthier people would get more from Social Security (actual payment plus length of collecting), while poorer people would get more assistance from Social Security disability insurance and Medicaid.  Medicare did not differ much based on income.” 

“Research suggests the Social Security gap has widened considerably.  When Reagan was elected President, the wealthy 50-year male could anticipate collected $103k more than his poorer neighbor.  In 2010, the gap was $173k.  The researchers note that due to the widening life expectancy gap, Social Security is becoming less progressive.”  

“If all government benefits are included and adjust for the taxes paid by American men after the age of 50, the lifetime value of government benefits is less skewed.  However, the boost to middle and upper incomes is still significant.”

The premature death of American men due to substance abuse, obesity and suicide are well documented, even if the underlying causes are debated.   To the extent that the scarcity of health care is distributed by the price mechanism, economic inequality facilitates inequalities in health and longevity.”    

“The widening income and wealth disparities have far-reaching ramifications.  Some economists link the growing disparity to economic fragility and even as a contributing factor to the Great Financial Crisis.  The disparity has grown since the crisis as equity investors, and homeowners have done considerable better than those who have limited investments and do not own a home. The disparity of income and wealth may also be both cause and effect impact the participation rate in the labor market, the still elevated levels of levels of those marginally attached to the labor force (U-6).”    

“The implications profound.  A study by Stanford economists last year showed that nearly every child born in 1940 (92%) had a higher pretax income at the age of 30 than their parents at the same age.   The two key explanatory variables were strong economic growth and a more equitable sharing of that growing pie.   For Americans born in 1960, it had fallen to 62%, and for those born in 1980, 50%. Of note, the study found that if growth remains low, but the disparity of income was at 1970s levels, the share of 1980 cohort would out-earn their parents by 80% rather than 50%.  If growth had returned to its former levels, but the income disparity remained only 62% of those born in 1980 would earn more than their parents.”


07:34 USD/JPY fades a spike to 111.40, but keeps 111.00

The bulls take a breather after the latest uptick to two-week tops of 111.39, triggering a minor-retreat in USD/JPY back towards 111.15 region.

Despite prevalent risk-friendly market environment, the USD/JPY pair deflated from the highest levels in two-weeks, as the tepid-recovery in the US dollar against its main peers from five-month troughs lost legs earlier on the day.

The latest leg down in the buck can be attributed to the retreat in the US yields, particularly the benchmark 10-year treasury yields. The US yields rallied in the US last session, tracking the solid performance on the Wall Street and amid rising bets of a June Fed rate hike.

In the day ahead, the corrective slide in the major could extend, as investors clear out their long positions ahead of the US tax reforms plan announcement and BOJ monetary policy decision.

In the meantime, risk trends will continue to drive the yen markets, in absence of economic data from the US docket today.

USD/JPY Technical levels                 

A break above 111.39 (2-week high) would expose 111.50/61 (psychological levels/50-DMA) and 112 (round figure). On the other hand, a breach of support at 111 (key support) could yield a test of 110.23 (5-DMA) and 110.05/00 (classic S1/ Fib S1).  


07:32 Japan All Industry Activity Index (MoM) rose from previous 0.1%to 0.7% in February


07:29 Australia: Wellbeing unchanged in Q4 - NAB

Analysts at NAB explains that Australians reported little change in the quality of their lives in Q4 2016, with NAB’s Wellbeing Index steady at 64.3 points.

Key Quotes

“While we were more satisfied with our lives and valued it more highly, we fared worse when it came to happiness and anxiety. Overall, the story remains one where our anxiety levels continue to be the big detractor from our wellbeing. The gulf between it and the other wellbeing drivers also remains substantial and shows no sign of getting any better.”

“Australians remain highly anxious. While having more money might solve some of our concerns, it would do little to solve some of the biggest detractors of wellbeing. But, it could help close the “wellbeing gap” between high and low income earners.”

Highlights

  • Little change in overall wellbeing, but anxiety remains the key issue…... and the gulf between anxiety and other wellbeing drivers shows no sign of improving.
  • Wellbeing remains low for singles, young people, middle aged men & low income earners….. Wellbeing is highest for over the 50s, widows, married people and high income earners.
  • Wellbeing is most positively influenced by our safety, relationships and homes…. In contrast, abuse and victimisation, a lack of time & substance use, detracts most.
  • Most drivers of wellbeing have a much bigger positive impact on high income earners than low income earners…. particularly when it comes to standard of living, funding retirement, general finances, homes, physical health and mental wellbeing.
  • While money might solve some of our concerns, it would do little to solve the biggest detractors of wellbeing…. Having more money would have the biggest positive effect on our ability to fund retirement, standard of living, and the homes we live in. But, it would have the least impact on substance use, events such as abuse and victimisation, and the time it takes us to get to work - the very factors that detractor the most from our wellbeing.
  • Where money would help, how much more would make a difference to our wellbeing?..... On average just over $1.1 million for retirement funding, $500,000 for our standard of living and the house we live in, and $810,000 to buy or find a new home.
  • So there’s more to life than money….. but for some drivers of wellbeing having more money would help a lot and also potentially help to narrow the “wellbeing gap” between high and low income earners.”

07:22 Australia: Headline inflation back in the band, AUD remains capped - Westpac

The research team at Westpac suggests that despite the fact that Australia’s headline inflation has crept into the bottom end of the RBA band for the first time since Q3 2014, the core trimmed mean outcome of 0.48%qq/1.9%yy suggests discounting remains a factor depressing price pressures.

Key Quotes

“The modestly weaker than expected Australian CPI outcome has added yet another factor capping the A$ today: softer commodity prices; a more protectionist stance from US President Trump on Canadian lumber imports and higher US yields leave the A$ with strong resistance towards 0.7580/90. We remain a seller of strength up into the 0.7600/50 region if seen and expect to see the A$ heading towards 0.74 by year end.”

“For bonds:

  • Ahead of the release our expectation was that the risk reward was skewed toward more bearish outcomes. That is, given the heaviness of USTs in recent sessions as the “risk on” thematic has dominated, we expected a stronger data outcome to see bond futures sell-off more than a below consensus number sparking a major rally. As it turned out, there was a small pop higher in 3yr & 10yr bond futures prices on the announcement, but they were quickly given back. That suggests that 3yr bond futures will need to trade toward the 98.05-08 level before we seeing buying on the dip.
  • More medium term, this will have little influence on those who maintain that, while the likelihood of a near term RBA rate cut remains low, it is a more likely scenario than an RBA hike. Indeed, with a core inflation profile still below 2%, there is very little risk of that scenario being priced-out of market valuations for now.
  • In addition, there is little reason for the curve to steepen to cater for a higher inflation outlook. So we continue to expect the curve to remain broadly within a 70-80bp range, with our preference still leading toward entering flatteners on moves to 80bp or so. It will also cap any domestic-led widening in the AU-US 10yr bond spread, which we think is capped between 35-40bp.”

07:12 Australia: Commercial property market sentiment climbed to a new high in 1Q2017 - NAB

The analysis team at NAB notes that commercial property market sentiment climbed to a new high in the first quarter of 2017 according to the latest NAB Commercial Property Survey Q1 2017, with the Commercial Property Index rising 6 points to +27.

Key Quotes

“NAB Group Chief Economist said the improvement reflected much higher sentiment for Office property and a modest improvement in Industrial. Sentiment in the CBD Hotels sector was lower, but still very solid and highest across all sectors, while sentiment in Retail property markets was unchanged.”

“Confidence levels also lifted in Office, Industrial and CBD Hotels markets, but fell for Retail property as household consumption continues to slow to a moderate pace across most states and territories”.

“By state, sentiment is still highest in NSW, where it reached a new Survey high, followed by Victoria. It rallied in WA but is still very weak and fell in SA/NT and QLD” said Mr Oster.

“The latest survey found that prospects for capital growth in next 1-2 years improved for CBD Hotels, Office and Industrial property, but were unchanged for Retail.”

“Other findings include the expectation that Office property will continue to provide the best income returns in the next 1-2 years, with solid growth in NSW and Victoria continuing amid tightening vacancies in both states. Rental growth is expected to remain very weak in WA, reflecting expectations for elevated vacancy rates and significant over-supply.”

“The survey also reveals that just over 1 in 2 developers expect to start new projects in the next 6 months, with around 6 in 10 projects looking to develop residential projects.”

“Funding conditions are however now considered to be harder than at any time since the final quarter of 2011, particularly for debt borrowing, and are expected to become even harder in the next 6-12 months.”


07:09 Australia: Q4 CPI printed 0.5% - Westpac

Justin Smirk, Research Analyst at Westpac, explains that the Australian Q4 CPI printed 0.5% compared to Westpac’s forecast for 0.6% while the market median was also 0.6%.

Key Quotes

“The annual rate is now 2.1%yr compare to 1.5yr in Q4, 1.3%yr in Q3 and 1.0%yr in Q2. The June quarter was the lowest rate of annual inflation since June 1999.”

“The core measures, which are seasonally adjusted and exclude extreme moves, rose 0.4% on average compared to the market’s expectation of 0.5% rise. Westpac’s forecast was also 0.5%. In the quarter, the trimmed mean gained 0.48% while the weighted median lifted 0.38%, both on the softer side of expectations highlighting just how modest the broader inflation picture is outside a few isolated sectors. The annual pace of the average of the core measures is now 1.8% from 1.5%yr in Q4 and Q3.”

“The six month annualised pace of core inflation came in 1.8%yr, a modest lift from the 1.6%yr pace in Q1, making this the eighth quarter in a row the six month pace has been below the bottom of the target ban. Our current forecasts do not see the six month annualised pace of core inflation returning to the band till the March quarter 2018.”

“As always there were surprises in the quarter even from the components we have some data on but this time they were quite modest. Our forecast 0.6%qtr was based on large contribution from power bills, auto fuels and the usual seasonal bump in health care, domestic travel and education being partially offset by falling fruit & vegetables, seasonal discounting for clothing, footwear and household contents plus the steady decline in audio visual & computing prices.”

“What stood out compared to our forecasts was the stronger rise in dwelling prices (1.0%qtr vs 0.5%qtr expected) but this was the only significant upside surprise. Food prices overall fell –0.2% (0.0% expected) while household contents & services were down 1.0% (1.0% expected), health costs rose just 2.0% (2.6% expected), car prices continue to fall (–0.5% vs 0.5% expected) and a surprising 1.9% fall in holiday travel (+0.9% expected) due to an unexpected fall in domestic travel costs.”

“The March quarter continues the run of softer inflation prints as the competitive margin squeeze appears to remain in place. Dwelling costs have lifted a bit (we don’t know if that is due to the inclusion of attached dwellings prices) and rising power bills are coming through but rent inflation remains very modest. So even with inflationary expectations drifting back towards the long-run average (we suspect fuel and power bills are responsible for this) there is little in this release to suggest that inflation is gathering any momentum.”

“For now our forecast see headline inflating peaking at 2.3%yr in Q2 2017 before easing back to 1.8%yr by June 2018. Core inflation holds at, or just above, 2.0%yr through 2018. Given this soft update, we would suggest the risks continue lie to the downside to these forecasts.”


07:06 Scottish Labour leader Dugdale: Brexit without a deal as damaging as independence

Scottish Labour leader Kezia Dugdale, in her speech to the STUC on Wednesday, will claim Tory threats that Britain could leave the European Union without an agreed Brexit deal are as damaging to the UK as Nicola Sturgeon’s plans to hold a second independence referendum, a Scottish daily reports.

Ms Dugdale will say: “The Government’s handling of Brexit has shown us the risks they’re willing to take with our country’s economy.”

“Threatening to walk away from the EU without a deal is no better than Nicola Sturgeon’s threat to walk away from the UK with independence. Both would lead to job losses and even more austerity than we’re already facing.”


07:02 UKs labor party would seek softer Brexit if elected

As per CNN report, Britain’s labour party, has vowed to scrap May’s Brexit plans if it wins the general elections in June. 

Labour's Brexit spokesman Keir Starmer said that, if elected, his party would guarantee EU nationals living in Britain the right to remain in the UK after the split. He added that his party will offer a clear alternative to May's plans for a "Hard Brexit."

Starmer called Theresa May’s Brexit vision ‘reckless’. 


06:40 NZD/USD heavy, but bounces-off 0.6920 post-NZ data

The New Zealand dollar found some support from upbeat NZ credit card spending data, and hence, aids the recovery in NZD/USD from daily lows struck at 0.6922.

The Kiwi stalled its three-day sell-off and now looks to regain 0.6950 barrier amid a minor-retreat in the treasury yields, which boosts the demand for the NZD as an alternative higher-yielding Emerging Market currency.

Moreover, a broadly subdued US dollar also collaborates to the renewed upside seen in NZD/USD over the last hour. Meanwhile, the bulls also find some respite from persisting risk-on market profile amid easing political concerns.

Focus now shifts towards the US oil inventories data and Trump administration’s tax reforms plan’s announcement due later in the NA session.

NZD/USD Levels to consider                                                                              

To the upside, the next resistance is located at 0.6968 (daily pivot), above which it could extend gains to 0.6986/96 (20 & 5-DMA) and from there to 0.7050 (classic R2/ Fib R3). To the downside immediate support might be located at 0.6905/00 (Apr 12 low/ zero figure), and from there to 0.6887 (Mar 9 low), below 0.6836 (classic S3) would be tested.


06:16 BBG Survey: Economists see faster China growth, moderate consumer inflation

According to the latest Bloomberg survey, a majority of the economists polled upgraded their forecasts for China’s economic growth this year, while projecting that the consumer inflation will continue to moderate.

Key Points:

Bloomberg survey conducted from April 18 to 25, and compared with forecasts in the March poll. 

“Growth in the world’s second-largest economy unexpectedly picked up to 6.9 percent in the first quarter, clocking its first back-to-back acceleration in seven years

Economists cut forecasts for consumer price index gains, which they expect to average 1.6 percent this quarter, down from an earlier estimate of 2 percent. They lowered full-year CPI estimates to 2 percent from 2.2 percent in the previous survey.

Forecasts for the producer price index edged down to 6.7 percent for this quarter from 6.8 percent in the last poll, as analysts see a gradual easing of that pace in the coming year.”


05:52 Japan domestic economy is clearly picking up Nikkei

“BOJ has Japan’s economy right where it wants” is the title for the report from ‘The Nikkei’, which says, “While the Bank of Japan’s 2% inflation target remains elusive, the domestic economy is clearly picking up”.

Domestic economy is indeed picking up pace, if we take into account the fact that Japan import growth hit 3-year high in March.


05:51 BOJ to keep its policy stance intact on Thursday - Barclays

FX Strategists at Barclays provide their insights on what to expect from Thursday’s BOJ monetary policy review.

Key Headlines:

The BOJ is expected to keep its policy stance intact at its policy meeting this week.

In addition, Barclays expects the BOJ to leave its real GDP growth forecasts largely unchanged while lowering its core CPI projections, especially for FY17.

"Furthermore, the BoJ’s announcement of its JGB purchase plan for May (Friday) will be watched after reduction in the recent month. We expect it to keep buying ranges unchanged given that recent buying amounts have been at or above the middle of the ranges announced in April for all sectors and that"


05:46 EUR/USD: Bullish above 1.0900 on ECB taper hints & softer USD

The EUR/USD pair stalled its recent bullish momentum in the Asian session this Wednesday, and now enters a phase of consolidation, after the bulls ran into the key resistance of 1.0950 levels.

The spot is trying to defend the bids near 1.0935 region at the moment, moving slightly away from five-month tops reached at 1.0951 in the US last session.

The Euro extended its rebound versus the American dollar on Tuesday, after the US dollar took the back seat across the board amid risk-on trades and doubts whether the Trump administration will actually provide details on the tax reform plans on Wednesday.

The spot also remains underpinned amid easing French election-related anxiety, as a Macron win appears to be full priced-in by markets, with most opinion polls showing about 60% support for Macron against 39% for the anti-EU candidate Le Pen.

Also, expectations of some hawkish hints from the ECB, with markets widely anticipating the central bank to resort to taper talks, adds to the recent bullish tone seen behind the major.

Nothing of relevance for the major in the day ahead, and hence, the US tax reform plans announcement will hog the limelight later in the NA session.

EUR/USD Technical Levels

Technical resistances for the pair are aligned at 1.0950/51 (psychological levels/ 5-month tops), 1.0968/71 (classic R1/ Fib R2) and finally 1.1000 (key resistance). On the flip side, the spot finds next support at 1.0909/00 (daily pivot), a break below that level could open the door to 1.0866/67 (5-DMA/ classic S1) and 1.0775 (10-DMA).


05:38 Treasury yields rise as Fed rate hike bets rise

US treasury yields advanced on Tuesday as expectations that the Fed may raise interest rates at its June meeting increased after Trump said on Friday that tax cuts would be announced today.

According to CME data, Futures traders are pricing in a 71% probability of a June rate hike, up from 49% last Wednesday.

The 10-year treasury yield rose to 2.345%, the highest level since April 11. The yields hit five-month lows of 2.17% last week ahead of French vote. The risk-on in the markets also reduced the demand for the safe haven Treasuries, pushing the yields higher.

Investors await the sale of $62 billion in new short- and intermediate-dated supply. The Treasury auctioned $26 billion worth of two-year notes on Tuesday.

 

 

 


05:23 Aus headline CPI is now in the RBA s 2-3% target band for the first time in 9 quarters - GS

Analysts at Goldman Sachs out with their afterthought on the latest Australian Q1 2017 CPI report.

Key Headlines:

The data is not a touch weaker than expected

Important to note that there is a clear reacceleration at both the headline level (2.1% YoY vs. 1.5% last quarter) and underlying levels (Trimmed Mean: 1.9% vs. 1.6% last & Weighted Median: 1.7% vs. 1.4% last)

Headline CPI is now in the RBA's 2-3% target band for the first time in 9 quarters

Headline CPI would have to print incredibly soft (0.1-0.2% QoQ) next quarter in order to undershoot the RBA's forecasts

We think this is very conservative and hence we see upside risks to the RBA's forecast

We think there is sufficient momentum for RBA to upgrade their headline inflation forecasts over next few months and their underlying inflation forecasts later this year

On AUD:

AUDUSD rallied from 0.7535 to 0.7557 highs going in. and subsequently printed 0.7509 lows/0.7513 last

AUDNZD traded from 1.0855 to 1.0865 ahead of the number, then 1.0823 lows/1.0827 last

From a fundamental perspective, this weakness is probably a fade


05:06 AUD/JPY rejected at 87.00 on evidence of peak inflation in Australia

AUD/JPY was offered at 87.00 handle after the data released in Australia added credence to the ‘peak inflation’ argument.

The pair clocked an intraday low of 83.50 levels and was last seen trading around 83.63 levels.

What’s peak inflation?

Peak inflation is the word coined for potential rollover of inflation expectations and commodity prices. The data released in the advanced world over the last one month or so showed the CPI growth has stalled.

The latest to join the bandwagon is Australia. The data released today showed the first quarter headline CPI remained unchanged at 0.5% as opposed to the expected rise to 0.6%. The RBA’s ‘trimmed mead’ or core inflation did beat estimates, but failed to keep the AUD bid.

AUD/JPY Technical Levels

A breakdown of support at 83.23 (Apr 4 low) would open door for 82.97 (5-DMA), under which the losses could be extended to 82.18 (200-DMA). On the higher side, only a daily close above 83.82 (Mar 28 low) could yield a sustained rally to 85.05 (50-DMA) and 85.38 (100-DMA). 

 


04:44 US OMBs Mulvaney: Trump will not agree to include Obamacare subsidies in Spending Bill

The US President Trump's Director of the Office of Management and Budget (OMB) Mick Mulvaney crossed the wires now, via CNN, noting that Trump will not agree to include Obamacare subsidies in Spending Bill.


04:43 AUD/USD offered at 200-DMA on weaker Aussie CPI release

AUD/USD was offered at the 200-DMA level of 0.7553 after the first quarter consumer price index (CPI) missed estimates.

The currency pair dropped to a low of 0.7518 in a knee jerk reaction. An upbeat trimmed mean CPI did trigger a partial recovery to 0.7530; which quickly fizzled out.

RBA ‘trimmed mean’ CPI beats estimates

The losses are being capped at 0.7518 largely due to RBA trimmed mean CPI, which printed at 1.9% y/y, beating the estimated rise to 1.8% from 1.6%. The trimmed mean rose to 0.5% y/y as expected. The 'trimmed mean' is RBA's core inflation figure. 

The CPI remained unchanged at 0.5% q/q as opposed to the expected rise to 0.6%. That triggered the drop in the AUD/USD from the 200-DMA resistance.

Despite the miss on the CPI figure, the 10-year Aussie bond yield holds at 2.66%; the highest in April 3. Moreover, the resilience in the yield is largely in line with its global peers. The US 10-year yield sits at 2.33%; the highest level in more than two-weeks. 

AUD/USD Technical Levels

A break below 0.7491 (Mar 9 low) would open doors for a sell-off to 0.7417 (Dec 7 low) and 0.74 (zero figure). On the higher side, only a daily close above 0.7553 (200-DMA) would open up upside towards     0.7604 (50-DMA) and 0.7679 (Mar 30 high).

 

 


04:39 Australia s Q1 2017 CPI: Headline misses expectations

Following the sluggishness seen in Australia's Q4 2016 CPI readings, today's inflation figures for the Q1 2017 showed a mixed picture, with the headlines numbers missing expectations. However, the annualized CPI figures reached the highest rate since Sept quarter of 2014, while the core – trimmed CPI came in a tad firmer.

Main headlines

CPI headline q/q +0.5% vs  0.6% exp and 0.5% prior

CPI headline y/y +2.1% vs 2.2% exp and 1.5% prior

RBA trimmed mean +0.5% vs 0.5% exp and 0.4% last

RBA trimmed mean y/y +1.9% vs 1.8% exp and 1.6% last

Q1 KEY FIGURES

Rose 0.5% this quarter, compared with a rise of 0.5% in the December quarter 2016.

Rose 2.1% over the twelve months to the March quarter 2017, compared with a rise of 1.5% over the twelve months to the December quarter 2016.

OVERVIEW OF CPI MOVEMENTS

The most significant price rises this quarter are automotive fuel (+5.7%), new dwelling purchase by owner-occupiers (+1.0%), medical and hospital services (+1.6%) and electricity (+2.5%).

The most significant offsetting price falls this quarter are international holiday travel and accommodation (-3.8%), fruit (-6.7%) and furniture (-3.5%).


04:32 Australia Consumer Price Index (YoY) came in at 2.1%, below expectations (2.2%) in 1Q


04:31 Australia Consumer Price Index (QoQ) below expectations (0.6%) in 1Q: Actual (0.5%)


04:31 Australia RBA trimmed mean CPI (QoQ) meets expectations (0.5%) in 1Q


04:31 Australia RBA trimmed mean CPI (YoY) came in at 1.9%, above expectations (1.8%) in 1Q


04:20 PBOC set the Yuan reference rate at 6.8845

The People's Bank of China (PBOC) set the Yuan reference rate at 6.8845 vs. Tuesday's fix of 6.8833


04:16 Fox News: US navy destroyer has encounter with the Iranian ship - Livesquawk

Livesquawk reported headlines from Fox News earlier on the day, citing that US navy destroyer has encounter with the Iranian ship. No further details have been provided on the same.


04:11 Aussie Press: IMF forecasts should guarantee Australia retains its AAA credit rating

The Australian press published a piece overnight on the International Monetary Fund’s (IMF) outlook on the Australian economy.

Key Points:

IMF expects a $27 billion surge in federal and state tax revenue over the next four years

Will bring the combined budget position back to surplus by 2020, two years earlier than it predicted six months ago

If borne out in next month's budget, the IMF forecasts should guarantee Australia retains its AAA credit rating because net public sector debt peaks at a lower level and then starts declining more rapidly

The improved budget outlook is revealed in the IMF's global economic database and reflects the fund's upgrade of its forecasts for Australia's economy in its ­global economic review released last week


04:09 Iran plans to double Halfaya oil field output

As per Reuters report, “Iraq has launched the third and final phase of work to expand its southern Halfaya oil field, aiming to double its output capacity in 2018 to 400,000 barrels per day.”

“Halfaya, operated by PetroChina, is Maysan Oil's largest field, producing 200,000 of the company's total output of 380,000 bpd”, said Adnan Noshi, head of Maysan Oil Co.

“Expansion at Halfaya should raise Maysan's overall output to nearly 600,000 bpd in 2018,” he said.


04:04 AUD/JPY breaks higher, re-attempts 84.00 ahead of Aus CPI

The AUD/JPY cross finally brought an end to its overnight consolidation box in Tokyo, and broke to the upside amid an extended rally in the Asian indices, boosting the rate to test 84 handle.

Risk-on sentiment remains the underlying theme in Asia so far, diminishing Yen’s attractiveness as a safe haven across the board, while the higher yielding currency Aussie recovers ground and turns positive, benefiting from a better sentiment towards risk assets.

Reflecting risk-on market profile, the benchmark 10-year US yields trade near 2-week tops of 2.345, while the Asian stocks trade +0.65% to +1%.

However, the bulls remain cautious heading towards the Australian Q1 CPI data release, which is expected to shape up next direction for the AUD. Australia's Q1 2017 CPI preview - NAB

Technical Levels

Higher side: 84.47/50 (Apr 5 high/ psychological levels), 84.73 (50-DMA), 85 (zero figure)

Lower side: 83.47 (daily pivot), 83.23/16 (5 & 200-DMA), 83 (key support)


03:54 Gold drops to Feb high on broad based risk-on

Gold prices dropped to the February high of $1263 levels as the major US equity indices neared record highs, while the treasury yields jumped to two-week highs.

Risk-on trade is just sweeping the globe, thus investors have little incentive to hold the zero-yielding safe haven yellow metal. Strong US corporate earnings and Trump’s tax talk added fuel to Macron rally, making the risk-on rally a bit more sustainable. The geopolitical uncertainty appears to have fizzled out as well.

The drop in gold is in line with the losses in other traditional safe haven assets like Treasuries and funding currencies like Yen. The 10-year treasury yield rose to 2.34%, the highest level since April 11, meanwhile, the Dollar-Yen pair jumped to 111.35; its highest level since April 10.

Gold Technical Levels

A break above $1273.30 (Apr 7 high) would open up upside towards $1290 (Apr 21 high) and $1297.40 (Apr 17 high). On the other hand, a breakdown of support at $1263 (Feb high) could yield a sell-off to $1249.50 (Oct 7 low) and $1245.50 (Apr 5 low).

 


03:49 Eyes on AUD/USD for today - ANZ

Analysts at ANZ noted some key takeaways and events.

Key Quotes:

 "In Australia, the focus will be on Q1 CPI where our colleagues expect annual and core inflation to bounce to 2.0% and 1.7% y/y respectively."

"The NZD remained out of favour despite an improvement in global risk sentiment. 

The ANZAC holiday is likely to have had an impact on liquidity and CAD was dragged lower after tariffs were levied on lumber exports to the US. 

The big mover has been the EUR, which is close to a 5-month high after the first round of the French election. 

JPY underperformed as risk sentiment improved.

There will be a bias for the local curve to steepen on the open given global moves and with the 2-year trading lower during the London session."


03:45 China Press: China monetary policy needn t be too tight

China’s Securities Journal out with the latest headline this Wednesday, citing that the Chinese monetary policy need not be too tight, Livesquawk reports.


03:40 GBP/USD: Struggle with 1.2845 extends into Asia, despite risk-on

The GBP/USD pair extends its overnight side-trend into Asia and remains slightly offered below the mid-point of 1.28 handle, as the US bulls appear to find some respite after yesterday’s sell-off in the greenback across the board.

Cable remains confined within a 10-pips slim range, with the downside cushioned by persisting risk-on trades, after the Asian indices track the rally in their Wall Street counterpart, with full markets returning.

Over the last hours, the US dollar is seen recovering some ground against most of its major peers, in response to the latest Trump headlines, citing that the US President Trump’s administration plans to tax repatriation of corporative foreign earnings at 10%. The USD index moved-off multi-month troughs of 99.57 and now trades muted around 99.68.

Looking ahead, amid a data-empty UK and US dockets, all eyes remain on the Trump administration’s announcement of the tax reform plans later on Wednesday, which will have a significant impact on the pair.

GBP/USD Levels to consider            

A break above 1.2842/ 51 (daily top/ Apr 20 high) could lift the pair above 1.2871 (Apr 24 high), beyond which a test of 1.2912 (flash rally high) is imminent. Conversely, a break below 1.2819 (5-DMA), leading to a subsequent break below 1.2763/58 (10-DMA/ Apr 21 low) is likely to drag the pair towards testing its next support near 1.2722/00 (classic S3/ zero figure).


03:36 USD/CNY fix projection: 6.8882 - Nomura

Analysts at Nomura offered their projections for today's USD/CNY fix.

Key Quotes:

"Our model1 projects the fix to be 49 pips higher than the previous fix (6.8882 from 6.8833) and 19 pips higher than the previous official spot USD/CNY close of 6.8863. The basket implied change is 22 pips higher than the previous official spot USD/CNY close (6.8885 from 6.8863)."


03:33 EUR/JPY: risk on continues in Tokyo, eyes now for 123.00

Currently, EUR/JPY is trading at 121.56, up 0.14% on the day, having posted a daily high at 121.70 and low at 121.27.

  • Market sentiment lifted overnight - ANZ

EUR/JPY remains better bid in Tokyo following a strong performance overnight for the euro. EUR/USD battered down the doors of the 1.09 handle after the cross rallied from 120.00 in London in a sell-off in the yen from 110.50's vs the greenback.  Risk sentiment continues to improve and the US stock market rallied forcing further bids in the cross and ceiling the deal for a test of the 11 handle in USD/JPY this Tokyo and to break the recent highs for the month in the cross.

EUR/JPY levels

EUR/JPY targets 123.00 in surpassing the Feb high of 122.87. to the downside, Analysts at Commerzbank expect, in the medium term, for the cross to still target the 112.62 October 2016 low and the 112.53 2012-2017 support line, which they look to hold and provoke reversal longer term, provided that no weekly close above the December high at 124.08 is made. "Longer term outlook is neutral to negative: The erosion of the 117.50/35 the 2016-2017 uptrend is negative and we look for losses to it's  112.53 5 year support line which is expected to hold and provoke a reversal."


03:28 USD/JPY jumps above 111.00 as the 10-year treasury yield trades at 2-week high

USD/JPY chewed through resistance at 110.62 (23.6% fib retracement of 118.66-108.13) in the North American session and rose to 111.24 in Asia as risk-on rally in the US pushed the 10-year yield to a 2-week high of 2.343%.

NASDAQ closes above 6,000 for the first time

There is no stopping the stock market bulls. Dow jumped 200 points and the NASDAQ closed above 6000 for the first time ever. S&P 500 is near its all time highs as well.

Big names like Caterpillar, DuPont, McDonald’s Corp topped the analysts' expectations, thus adding fuel to the ‘macron rally’. This reduced the demand for the safe haven treasuries and pushed the 10-year yield above the critical technical resistance of 2.31%.

The Dollar-Yen followed suit and remains well bid in Asia around 111.20 levels. The 10-year yield currently trades around 2.34%. The rally in the risk assets looks set to continue with Trump expected to unveil the outline of the tax plan later today, which will include a cut in corporate tax from 30% to 15%.

Bullish outside day candle

The daily chart of the USD/JPY pair shows a bullish outside day candle, a pattern that suggests continuation of the rally.

USD/JPY Technical Levels

A break above 111.58 (Apr 10 high) would expose stiff resistance at 111.60 (Feb low). A violation there could see the spot test supply around 112.15 (38.2% fib of 118.66-108.13).

On the downside, support is seen at 110.62 (23.6% fib of 118.66-108.13) and 110.09 (Apr 7 low). Only a daily close below 109.59 (previous day’s low) would signal bullish invalidation.

 


03:16 US Comm Sec Ross: Trump administration mulls more trade actions - WSJ

The US Commerce Secretary Wilbur Ross said in a WSJ interview late-Tuesday that The Trump administration is considering launching trade actions to protect the US aluminum, semiconductor and shipbuilding industries, while at the same time ramping up free-trade talks with the European Union, Japan and the UK.

Key Quotes:

“Having a nuclear-power capability is obviously a matter of national security”

“So is the treatment of nuclear waste, which is another activity of Westinghouse. And so is the maintenance of nuclear facilities”

“We never canceled TTIP. We sort of suspended the negotiations, but we never canceled. It wasn’t like TPP”


03:07 Canadas PM Trudeau tells Trump that Canada will vigorously defend interests of softwood lumber industry

Reuters reporting statement from the Canadian PM Trudeau’s office, directed to the US President Trump, in the wake of yesterday’s reports that the Trump administration plans to impose 20% tariffs on soft lumber imports from Canada.

Key Headlines:

"Refuted the baseless allegations" of US commerce department on lumber

Tells Trump that Canada will vigorously defend interests of softwood lumber industry

Canadian PM, Trump agree on the importance of reaching a negotiated agreement on softwood lumber

Tells Trump canada will stick to NAFTA rules givingUS access to duty-free and quota-free access for milk protein substances


03:01 When is Aussie CPI and how might it affect AUD/USD?

Australian CPI overview

The Australian Q1 CPI report is scheduled for release tomorrow at 0130GMT. This report is a major event for the Aussie and related markets as a key contributing factor to the RBA's monetary policy decisions. 

"Westpac’s forecast is 0.6%qtr (same as consensus) lifting the annual pace to 2.3%yr from 1.5%yr. March is a seasonally softer quarter with the ABS seasonal factors boosting our seasonally adjusted estimate to 0.8%qtr. The core measures (trimmed mean, weighted median) are expected to be 0.1ppt lower," explained analysts at Westpac.

Essentially, the market expects that underlying inflation is likely to remain weak and below the RBA's target band while ongoing labour market softness will keep wages inflation contained. At the same time, the price of the Aussie will be keeping imported goods and services low.

How could CPI affect AUD/USD today?

AUD/USD has been consolidating at the mid point between the 12th April rally from 0.7470 to 0.7610 resistance and 17th April highs. The recent sell-off to 0.7520 from the April 19th's bullish correction to 0.7583 could gather momentum to the downside should the data come in below expectations, firming up the view that the RBA remains on hold for the remainder of 2017 and into early 2018, widening the divergence between the Fed and RBA even further. A break below 0.7520 targets 0.7505 and then 0.7490 ahead of 0.7470 and April lows. If the data comes in as expected or higher, the next 0.7560 and 0.7580. 0.7610 being the ultimate target on a strong risk-on rally. 

Key notes:

"Potential government policies to tackle house price growth could impact rental growth going forward in both directions," explained analysts at NAB.

Australia's Q1 2017 CPI preview - NAB

About Australia CPI

The Consumer Price Index released by the RBA and republished by the Australian Bureau of Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The trimmed mean is calculated as the weighted mean of the central 70% of the quarterly price change distribution of all CPI components, with the annual rates based on compounded quarterly calculations.

 


02:39 Market sentiment lifted overnight - ANZ

Analysts at ANZ noted the that the market sentiment has lifted following the first round of the French election, with positive US company earnings and solid data also helping. 

Key Quotes:

"The EUR and asset markets have pushed higher, with the slight underperformance in the vote for National Front candidate Marine Le Pen (21.5%) boosting confidence that the anti-EU vote is not gaining sufficient traction to cause an upset in the second round of voting on May 7. That potentially may have implications for the anti-EU vote in other member states. Macron is expected to win 60-63% of the second round vote.

Overnight positive earnings from large multinationals lifted US equities, helping the MSCI All-Country Index and Nasdaq both push to all-time highs. US treasuries rose 4-6bps across the curve. The US 2 year auction drew strong demand with bid- to-cover at the highest level since May 2016. In Europe the curve bear steepened, with 30 year yields up 5 to 9 bps. Commodity prices headed higher driven by softs and oil. Gold prices declined as risk sentiment improved."


02:19 Trump s administration plans to tax repatriation of corporative foreignearnings at 10%

According to Livesquawk, U.S. President Donald Trump's administration plans to tax repatriation of corporative foreign earnings at 10%.


01:47 New Zealand Visitor Arrivals (YoY) dipped from previous 1.8%to -0.2% in March


01:41 AUD/NZD: headed to 1.09 and then 1.1000 - Westpac

Analysts at Westpac offered an outlook for AUD/NZD and rates.

Key Quotes:

"AUD/NZD 1 day: Higher towards 1.0900 multi-day, global risk-aversion fading (AUD is more sensitive).

AUD/NZD 1-3 month: Higher to 1.10. The cross remains well below fair value estimates implied by interest rates, commodity prices and risk sentiment, although is closing the gap (6 Mar).

AU swap yields 1 day: The 3yr should open at around 2.02% or higher, the 10yr around 2.89% or higher.

AU swap yields 1-3 month: Our RBA outlook is anchoring front end valuations. We expect 3yr swap rates to remain in a 2% to 2.3% range. (31 Mar)

NZ swap yields 1 day: NZ 2yr swap rates should open up 1bp at 2.34%, the 10yr up 3bp at 3.41%.

NZ swap yields 1-3 month: The RBNZ said it has ended its easing cycle and will remain on hold until 2020. That will anchor the short end, although markets will not abandon their expectations for earlier tightening which means occasional spikes in the 2yr will be likely. The long end will continue to follow mainly US yields, which we expect to rise. That means the curve steepening trend should continue. (17 Feb)"


01:19 US data flooding in - ANZ

Analysts at ANZ explained that the US data today showed some signs of moderation overnight, although outright levels remain elevated suggesting the economy continues to expand at a moderate pace. 

Key Quotes:

"April consumer confidence dipped to 120.3, with both the present situations and expectations indices falling. The fall only partly reversed the surge in March, with the headline index still close to a 16-year high. The details point to a strong labour market with respondents saying that jobs are plentiful rather than hard to find remaining close to a 16-year high (11.7 vs last 12.8). Inflation expectations remained stable at 4.7%. 

Elsewhere, new home sales were at 621k on an annualised basis, from 584k the previous month. The housing market continues to signal healthy overall economic conditions as demand remains strong despite reduced affordability due to higher interest rates and prices. 

Finally, the Richmond Fed manufacturing index was at 20 (mkt: 16; last: 22). The number of employees dropped to 5, from 20, while the work week fell to 8, from 21, driving the moderation in the business assessment. Additionally, shipments rose to 25, from 17; new orders remained at 26; and wages were steady at 21. Earlier in the week, the April Dallas Fed manufacturing activity index held up well at 16.8. The new orders rose sub-index to 11.5 (9.5) and the number of employees was stable at 8.5 (8.4).

In Germany, the April IFO index rose to 112.9. That was the third consecutive rise and fits with other evidence of decent momentum in economic activity. 

Euro area government debt fell to 89.2% of GDP in 2016 vs 90.3% in 2015 and is down from a post crisis high of 92% in 2014. The Euro area ran a budget deficit of 1.5% of GDP last year. The fiscal picture overall for the region is improving, but there is still slippage in the budget deficits of France (3.4% of GDP) and Spain (4.5%), which need to be addressed."


01:15 NZD/USD: how much further is there to the downside?

Currently, NZD/USD is trading at 0.6947, down -0.04% on the day, having posted a daily high at 0.6955 and low at 0.6947.

NZD/USD has been chipping away at the mid point of the 0.69 handle but the dollar has been unable to gain traction across the board due to the euro rallying and slowing up the bear's momentum. Analysts at Westpac noted that NZD/USD has been capped at 0.7055 and probably heading towards 0.6900 multi-day, the US’ trade protection policies. dominating elevated global risk sentiment.

  • Market wrap: dollar down on European currency advances - Westpac

NZD/USD 1-3 month:  

The same analysts explained the NZD/USD has the potential for higher to the 0.7100-0.7200 area during the month ahead, as USD longs are pared. "Further out, the Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD down towards 0.6900. The RBNZ’s persistent reminders it is on hold for a long time should also weigh."

NZD/USD levels

The 20th April rally to 0.7050 was broken yesterday along with the 200 ema on the hourly sticks and the 0.7000 psychological level. NZD/USD has moved towards the next critical level at 0.6933/50. A break of the 0.69 handle opens up the 0.6885 mark as being the recent lows guarding 0.6675 as the 29th May 2016 high on a break of the 0.67 handle. On the flip side, a run back to the previous aforementioned consolidation area, bulls have the 17th April highs of 0.7035 is sight protecting 0.7060/70 and recent high today around the 200-d ema (0.7067). There is a double bottom at 0.7130 as the mid-Feb lows.


00:47 Market wrap: dollar down on european currency advances - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: Risk-seeking accelerated yesterday, pushing some equity indices (e.g. NASDAQ, MSCI World) to record highs, and bond yields higher. Revised expectations regarding US reforms and fading geopolitical risks were among the catalysts.

Interest rates: US 10yr treasury yields rose from 2.26% to 2.34%, 2yr yields from 1.23% to 1.28%.. Fed fund futures yields rose, now pricing a June rate hike as an 80% chance (60% on Mon).

Key drivers at present include expectations of Trump’s tax reform announcement tonight, as well as risks of a US Government shutdown as the spending plan deadline on 28 Aprillooms.

Currencies: The US dollar index is down 0.3%, mainly due to outperformances by the European currencies. EUR rose from 1.0860 to 1.0950 – the highest since mid-November – helped by a Reuters story from unnamed ECB sources that it may tweak its policy guidance slightly in a hawkish direction at its June meeting. Continued relief regarding the French election result was probably also at play. USD/CAD rose from 1.3550 to 1.3626 – the highest since Feb 2016 – after the US Administration imposed tariffs on Canadian lumber imports. USD/JPY rose from 109.60 to 111.19, the safe-haven yen the worst performer on the day. AUD fell from 0.7570 to 0.7521, probably affected by the US trade protection move. NZD did even worse for the same reasons, falling from 0.7015 to 0.6941. AUD/NZD extended its multi-day rally to 1.0854."


00:06 US Dollar stays calm near five-month low, at 99.70

The US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, has been spending the last couple of hours in a very tight range around 99.70 as the day's sharp sell-off is taking a break after pushing the index to a new five-month low at 98.57. As of writing, the index was at 98.68, down 0.24% on the day.

Today's uninspiring macro data from the U.S. hurt the demand for the greenback during the American session, as the consumer confidence dropped in April. On the other hand, positive numbers from the housing sector were largely ignored.

The investors will be keeping a close eye on tomorrow's announcement, which will reveal the details of the tax reform in the United States. A positive reaction from the stock markets should increase the risk appetite, pushing the U.S. Treasury yields higher and possibly helping the US Dollar Index correct some of its recent losses. However, the usual correlation between the bond yields and the DXY hasn't been effective since the week started as the markets remained focused on the European currencies.

  • U.S. President Trump reportedly to proposing to slash the tax rate on pass-through companies to 15% - WSJ
  • U.S. President Trump's administration drops support for border adjustment tax - NYT

Technical outlook

A break below 98.30 (Nov. 10 low) could open the door towards 98 (psychological level) and 97.60 (Nov. 1 low). On the upside, the immediate resistance is located at 99 (psychological level) ahead of 99.75 (Mar. 23 low) and 100 (psychological level).


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Data source: FX Street
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