Market Brief
The Fed 29-30 April meeting minutes brought no new information to the markets. Policy normalization has been discussed in April, some participants said it is too early to talk about a sustained growth above the trend, the low wages has been pointed as the evidence of slack in the labor market. Our highlight is that the FOMC saw the inflation “well below the 2% target” and thus didn’t see a trade-off between unemployment and inflation. The latest inflation data somewhat doesn’t support this view (CPI y-o-y hit 2.0% in April, CPI ex-food and energy progressed to 1.8%), the tolerance should remain until 2.5%. The US 10-year yields advanced above 2.56% (one week high), DXY index spiked to 80.302.
EUR/USD tumbled down to 1.3635 (200-dma) and rebounded quickly as no particular hawkishness came out of the FOMC minutes. As suspected, the selling pressures on EUR increase as EU Parliament elections start today (May 22-25th). The event risk is high, the pair should continue testing the 200-dma. On the upside, the option barriers abound pre-1.3700. The key resistance is seen at 100-dma (1.3739). ECB/Buba Weidmann’s comments on uncertainty regarding ECB action by June saw no market reaction. EUR/GBP hit 0.80856 – January 2013 low levels and remained offered at 0.81000/0.81015 despite oversold conditions (RSI at 28.6%). Decent option barriers trail below 0.81000 for today and tomorrow expiry.
Japanese and Chinese manufacturing activity showed improvement in May preliminary PMI readings. The Japanese contraction is seen slower in May (49.9 vs. 49.4 prev), the HSBC China manufacturing PMI climbed to 49.7 (vs. 48.3 exp. & 48.1 last). The Asian equity markets traded in green. The Nikkei stocks gained 2.11%, Hang Seng and Shanghai’s Composite advanced 0.62% and 0.24% at the time of writing.
USD/JPY and JPY crosses were better bid in Tokyo. USD/JPY advanced to 101.76 (after hitting 100.82 in Europe open yesterday). Light option bids above 101.40 should give support to USD/JPY today. Key resistance is seen at the daily Ichimoku cloud cover (102.46/53). EUR/JPY rebounded slightly above the 200-dma in New York. Decent barriers should limit the upside below 140.00.
In UK, the hawkish shift in BoE minutes, combined to good retail sales and improved inflation, sent GBP/USD to 1.6922 in London yesterday. Finally, UK will publish the Q1 preliminary GDP figures (at 08:30 GMT), the consensus leans to steady growth on both quarterly and yearly readings: 0.8% growth q-o-q and 3.1% y-o-y. Any positive surprise should further boost the GBP-bulls towards year high levels (1.6996). The key resistance remains at 1.7000 (optionality) and 1.7043 (five year high).
Today, traders focus on French, German, Euro-Zone May (Prelim) Manufacturing, Services and Composite PMIs, French May Production Outlook and Manufacturing Confidence, Norwegian March Unemployment, UK April Public Finances, UK 1Q (Prelim) GDP and Total Business Investments q/q & y/y, Private Consumption, Government Spending, Gross Fixed Capital Formation, Export and Imports q/q, UK May CBI Trends Total Orders and Selling Prices, Canadian March Retail Sale m/m, Chicago Fed April Activity Index, US May 17th Initial Jobless Claims & May 10th Continuing Claims, US May (Prelim) Manufacturing PMI, US April Existing Home Sales m/m, US April Leading Index and Kansas City Fed May Manufacturing Activity.
| Todays Calender | Estimates | Previous | Country / GMT |
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Currency Tech |
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| FR May Own-Company Production Outlook | - | 9 | EUR / 6:45 AM |
| FR May Production Outlook Indicator | -12 | -15 | EUR / 6:45 AM |
| FR May Manufacturing Confidence | 100 | 100 | EUR / 6:45 AM |
| FR May Business Confidence | 94 | 94 | EUR / 6:45 AM |
| FR May P Markit France Composite PMI | 50.5 | 50.6 | EUR / 7:00 AM |
| FR May P Markit France Manufacturing PMI | 51 | 51.2 | EUR / 7:00 AM |
| FR May P Markit France Services PMI | 50.4 | 50.4 | EUR / 7:00 AM |
| GE May P Markit/BME Germany Composite PMI | 56 | 56.1 | EUR / 7:30 AM |
| GE May P Markit/BME Germany Manufacturing PMI | 54 | 54.1 | EUR / 7:30 AM |
| GE May P Markit Germany Services PMI | 54.5 | 54.7 | EUR / 7:30 AM |
| NO Mar Unemployment Rate AKU | 3.50% | 3.50% | NOK / 8:00 AM |
| EC May P Markit Eurozone Manufacturing PMI | 53.2 | 53.4 | EUR / 8:00 AM |
| EC May P Markit Eurozone Services PMI | 53 | 53.1 | EUR / 8:00 AM |
| EC May P Markit Eurozone Composite PMI | 53.9 | 54 | EUR / 8:00 AM |
| UK Apr Public Finances (PSNCR) | - | 15.7B | GBP / 8:30 AM |
| UK Apr Central Government NCR | - | 22.7B | GBP / 8:30 AM |
| UK Apr Public Sector Net Borrowing | 3.4B | 4.9B | GBP / 8:30 AM |
| UK Apr PSNB ex Interventions | 4.8B | 6.7B | GBP / 8:30 AM |
| UK Apr PSNB ex Royal Mail, APF | 8.4B | 6.7B | GBP / 8:30 AM |
| UK 1Q P GDP QoQ | 0.80% | 0.80% | GBP / 8:30 AM |
| UK 1Q P GDP YoY | 3.10% | 3.10% | GBP / 8:30 AM |
| UK 1Q P Private Consumption QoQ | 0.60% | 0.40% | GBP / 8:30 AM |
| UK 1Q P Government Spending QoQ | 0.20% | 0.00% | GBP / 8:30 AM |
| UK 1Q P Gross Fixed Capital Formation QoQ | 1.20% | 1.90% | GBP / 8:30 AM |
| UK 1Q P Exports QoQ | 0.00% | 2.80% | GBP / 8:30 AM |
| UK 1Q P Imports QoQ | 0.20% | -0.40% | GBP / 8:30 AM |
| UK Mar Index of Services MoM | 0.30% | 0.20% | GBP / 8:30 AM |
| UK Mar Index of Services 3M/3M | 0.90% | 0.90% | GBP / 8:30 AM |
| UK 1Q P Total Business Investment QoQ | 2.20% | 2.40% | GBP / 8:30 AM |
| UK 1Q P Total Business Investment YoY | - | 8.70% | GBP / 8:30 AM |
| UK May CBI Trends Total Orders | 3 | -1 | GBP / 10:00 AM |
| UK May CBI Trends Selling Prices | 10 | 9 | GBP / 10:00 AM |
| CA Mar Retail Sales MoM | 0.30% | 0.50% | CAD / 12:30 PM |
| CA Mar Retail Sales Ex Auto MoM | 0.30% | 0.60% | CAD / 12:30 PM |
| US Apr Chicago Fed Nat Activity Index | 0 | 0.2 | USD / 12:30 PM |
| US May 17th Initial Jobless Claims | 310K | 297K | USD / 12:30 PM |
| US May 10th Continuing Claims | 2675K | 2667K | USD / 12:30 PM |
| US May P Markit US Manufacturing PMI | 55.5 | 55.4 | USD / 1:45 PM |
| US Apr Existing Home Sales | 4.69M | 4.59M | USD / 2:00 PM |
| US Apr Existing Home Sales MoM | 2.20% | -0.20% | USD / 2:00 PM |
| US Apr Leading Index | 0.40% | 0.80% | USD / 2:00 PM |
| US May Kansas City Fed Manf. Activity | 7 | 7 | USD / 3:00 PM |