Market Brief
Risk sentiment remains volatile on concerns over Greece debt repayments. Developments regarding a bailout for Greece will remain the primary driver of FX today. Asia equity markets were mixed with the Shanghai Composite down -0.2% and Nikkei 225 marginally up 0.06%, while the Hang Seng fell -0.01%. The wires have been filled with false headlines over negotiation progress from the G7 meeting, making Euro trading extremely difficult. In a recent comments EU's Economic Commissioner Pierre Moscovici stated that a deal between Greece and international creditors could happen yet cautioned that the parties still had significant disagreements while liquidity conditions in Greece were deteriorations quickly. Before releasing additional bailout cash the EU is demanding significant reform to pensions, liberalization of labor markets and privatization of assets. Greece seems to be pushing for a deal this weekend ahead of the repayment to the IMF, debt is due 5th of June. However, judging from Mr. Moscovici comments, the EU is more conservative on estimates for an agreement. Without cash from reform deal and agreement with the EU to release bailout funds, it will be difficult for Greece to make repayments, consistently weighing on EUR and European equity markets. US short end yields have given back most of their gains since the strong core CPI read yet EUR/USD is skewed towards the downside.
Incoming US data continue to point to recovery from a weak Q1 GDP read. The healthy housing market a strong tone as April pending homes sales rose. However, US jobless claims unexpectedly increased by 282k which will put emphasize on next week’s critical payroll report. Interestingly, Fed members are increasingly signaling that they are ready to vote for a rate increase this year. Extreme dove Minneapolis Fed President Kocherlakota recent comments a clear exception. Today's second estimate for Q1 GDP should be revised further downward potentially into contraction territory, however, fresh data will be more important for the markets. We should see leading indicators in the Chicago PMI and Michigan consumer sentiments rise above markets expectations. USD should remain bid with EUR/USD heading back to 1.0867 support near term.
After breaking critical resistance at 122.50 and extending strengthen to 124.46. USD/JPY has taken a brief pause. Inflation data has been slightly stronger than expected yet consumer spending remained soft. But the key reason for the USD/JPY retreat from the highs was Finance ministers Aso’s comments that indicated Japanese policy makers are monitoring the JPY weakness. We suspect that while on the surface Japan's government publicly wants avoid rapid appreciation in USD/JPY, in private they want and need a soft yen. Economic growth has remained decent there are clear concerns in the recovery. In addition, while today's inflation report was not as negative as we had anticipated, we suspect the deflationary trend is entrenched and the BoJ will need to react. The comments injected a bit of two price action yet with short term US yield near corrective lows and Japanese investors rotating back into foreign securities we see further upside for USD/JPY. On the calendar today we should see Swiss GDP and KOF indicators, Canada's GDP and U.S. Chicago PMI.
Today's CalendarEstimatesPreviousCountry / GMT DE Apr Unemployment Rate Gross Rate 4.80% 4.80% DKK / 07:00 DE 1Q P GDP QoQ 0.40% 0.50% DKK / 07:00 DE 1Q P GDP YoY 1.70% 1.50% DKK / 07:00 SZ May KOF Leading Indicator 89.9 89.5 CHF / 07:00 TU Apr Trade Balance -4.80B -6.15B TRY / 07:00 SP May P CPI EU Harmonised MoM 0.20% 0.70% EUR / 07:00 SP May P CPI EU Harmonised YoY -0.60% -0.70% EUR / 07:00 SP May P CPI MoM 0.20% 0.90% EUR / 07:00 SP May P CPI YoY -0.50% -0.60% EUR / 07:00 SW Apr Household Lending YoY - 6.40% SEK / 07:30 SW Mar Wages Non-Manual Workers YoY - 1.60% SEK / 07:30 SW 1Q GDP QoQ 0.60% 1.10% SEK / 07:30 SW 1Q GDP WDA YoY 2.80% 2.70% SEK / 07:30 NO Apr Retail Sales W/Auto Fuel MoM 0.30% 0.30% NOK / 08:00 NO 1Q Manufacturing Wage Index QoQ - 0.90% NOK / 08:00 NO May Unemployment Rate 2.90% 3.00% NOK / 08:00 NO Jun Norges Bank Daily FX Purchases -700M -700M NOK / 08:00 EC Apr M3 Money Supply YoY 4.90% 4.60% EUR / 08:00 EC Apr M3 3-month average 4.50% 4.10% EUR / 08:00 SP Mar Current Account Balance - -2.0B EUR / 08:00 IT 1Q F GDP WDA QoQ 0.30% 0.30% EUR / 08:00 IT 1Q F GDP WDA YoY 0.00% 0.00% EUR / 08:00 IT May P CPI NIC incl. tobacco MoM 0.10% 0.30% EUR / 09:00 IT May P CPI NIC incl. tobacco YoY 0.00% 0.00% EUR / 09:00 IT May P CPI EU Harmonized MoM 0.10% 0.50% EUR / 09:00 IT May P CPI EU Harmonized YoY 0.10% -0.10% EUR / 09:00 IT Apr PPI MoM - -0.10% EUR / 10:00 IT Apr PPI YoY - -3.10% EUR / 10:00 IN Apr Fiscal Deficit INR Crore - -100654 INR / 10:30 SA Apr South Africa Budget -35.00B -1.23B ZAR / 12:00 SA Apr Trade Balance Rand -4.9B 0.5B ZAR / 12:00 BZ 1Q GDP 4Qtrs Accumulated -0.90% 0.10% BRL / 12:00 BZ 1Q GDP YoY -1.80% -0.20% BRL / 12:00 BZ 1Q GDP QoQ -0.50% 0.30% BRL / 12:00 IN 1Q GVA YoY 7.00% 7.50% INR / 12:00 IN 1Q P GDP Annual Estimate YoY 7.40% 7.40% INR / 12:00 IN 1Q GDP YoY 7.30% 7.50% INR / 12:00 CA Mar GDP MoM 0.20% 0.00% CAD / 12:30 CA Mar GDP YoY 2.10% 2.10% CAD / 12:30 CA 1Q Quarterly GDP Annualized 0.30% 2.40% CAD / 12:30 US 1Q S GDP Annualized QoQ -0.90% 0.20% USD / 12:30 US 1Q S Personal Consumption 2.00% 1.90% USD / 12:30 US 1Q S GDP Price Index -0.10% -0.10% USD / 12:30 US 1Q S Core PCE QoQ 0.90% 0.90% USD / 12:30 US May ISM Milwaukee 50 48.08 USD / 13:00 BZ Apr Net Debt % GDP 33.40% 33.10% BRL / 13:30 BZ Apr Nominal Budget Balance 5.0B -69.2B BRL / 13:30 BZ Apr Primary Budget Balance 12.5B 0.2B BRL / 13:30 US May Chicago Purchasing Manager 53 52.3 USD / 13:45 US May F U. of Mich. Sentiment 89.5 88.6 USD / 14:00 US May F U. of Mich. Current Conditions - 99.8 USD / 14:00 US May F U. of Mich. Expectations - 81.5 USD / 14:00 US May F U. of Mich. 1 Yr Inflation - 2.90% USD / 14:00 US May F U. of Mich. 5-10 Yr Inflation - 2.80% USD / 14:00 IN Apr Eight Infrastructure Industries - -0.10% INR / 22:00
Currency Tech
EUR/USD
R 2: 1.1450
R 1: 1.1043
CURRENT: 1.0949
S 1: 1.0882
S 2: 1.0521
GBP/USD
R 2: 1.5879
R 1: 1.5800
CURRENT: 1.5300
S 1: 1.5191
S 2: 1.5090
USD/JPY
R 2: 125.64
R 1: 124.14
CURRENT: 123.77
S 1: 118.91
S 2: 117.94
USD/CHF
R 2: 1.0240
R 1: 0.9571
CURRENT: 0.9448
S 1: 0.8936
S 2: 0.8823