Market Brief
FX markets remain in a tight range as activity from drivers were limited. Asian regional equity indices are slightly weaker as the Nikkei fell -0.35% and Shanghai composite was flat yet the Hang Seng rose +0.21%. The US 10-year treasury yield rose in Asia trading to 2.48%, following a 2bp jumper earlier. NZD/USD got a marginal lift from stronger building permits rising to 0.8517, pushing AUD/NZD down to 1.0947. GBP was the big mover as UK’s Gfk consumer confidence climbed to a nine year high at 0 in May verse expectation of -2. GBP/USD rallied to 1.6758 from 1.6714 as confidence in the economic recovery entrenched itself, adding speculation that the BoE will need to act. USD/JPY was range bound between 101.49 to 101.79 despite the release of thought-provoking data. Japan's household spending in April dropped indicating that the consumer might take longer than the expected time to recover from the nationwide sales tax. Stunned consumption will have clear repercussions into Abe stimulated economic recovery. Other Japanese data showed that inflation increased to 3.4%y/y in April as the VAT hike came into effect. Core inflation excluding food and energy rose to 2.3% in line with expectations, the quickest rate since 1997. Elsewhere, New Zealand’s April building permits rose 1.5% m/m vs. -3.5, following a strong 9.2% gain in March. In a final note on the news front, it is reported that the IMF will meet today to conclude the approval of the disbursement of two bailout tranches to Greece. Since Greece has made solid progress on their fiscal health, such as 2013 primary budget surplus, the decision should be easy for these technocrats. A positive results should give further strength to peripheral bond yields.
On the Docket
As for today, Flash estimates for May HICP inflation y/y in Spain should fall to 0.2% vs. 0.3% prior and in Italy 0.5% vs. 0.6% prior read in April. The Swiss KoF leading indicator is expected to fall slightly from 102.04 last month. In Canada Q1 GDP is expected to come in at 2.3% y/y and 2.9% y/y in Q4. Rising oil prices might provide a backstop for commodity currency yet this weaker data should put short term pressure on the CAD. Out of the US, strength in the labor markets should push personal income up 0.3%, but consumer sentiment possibly decelerated to just 0.2%. On inflation markets, anticipate headline and core PCE of 0.2%.
Currency Tech
EUR/USD
R 2: 1.3625
R 1: 1.3613
CURRENT: 1.3615
S 1: 1.3595
S 2: 1.3580
GBP/USD
R 2: 1.6810
R 1: 1.6760
CURRENT: 1.6745
S 1: 1.6708
S 2: 1.6682
USD/JPY
R 2: 102.02
R 1: 101.80
CURRENT: 101.69
S 1: 101.48
S 2: 101.26
USD/CHF
R 2: 0.9001
R 1: 0.8990
CURRENT: 0.8978
S 1: 0.8956
S 2: 0.8920