FTSE +15 points at 7337
DAX +3 points at 12285
CAC +4 points at 5105
Euro Stoxx +4 points at 3485
The US dollar index consolidated near its 50-day average before the release of ADP employment data and the FOMC’s (Federal Open Market Committee) March meeting minutes due later in the day. The Federal Reserve (Fed) raised the interest rates by 25 basis points at the March meeting and investors qualified the Fed action as a ‘dovish hike’ on the back of the Fed’s accompanying statement. However, soon after the interest rate hike, several FOMC members voiced hawkish comments, mentioning the possibility of two or three additional rate hikes in 2017
The Fed minutes are expected to give some clarity to confused investors. The US 10-year yields tested the 2.30% level on the downside, sending the gold higher to its 200-day moving average for the second time in two weeks. Offers are sheltered at $1260, yet heavy US yields could encourage further capital inflows into the yellow metal and underpin a recovery toward $1280. SPDR Gold Shares (NYSE:GLD), the world’s biggest gold ETF, benefits from light inflows to challenge the $120 resistance.
Of course, the Fed hawks need the economic data to be supportive for a steeper rate normalization path in the US. This week’s labour data could give a fresh direction to the US dollar and the yield curve.
The US ADP report is due today. According to analyst expectations, the US economy may have added 184’000 new private jobs in March, versus 298’000 printed a month earlier. The nonfarm payrolls data is due on Friday; the consensus is 174’000 versus 235’000 in February. Given the weak expectations, there is room for a positive surprise.
Therefore the Fed hawks are expected to remain alert into the labour data and the minutes.
The USD/JPY continues weighing on the 110 mark on the back of softer US yields. Nikkei (+0.31%) and Topix (+0.06%) saw limited demand in Tokyo. Gains came in toward the end of the session.
Chinese stocks opened mixed after two-day bank holiday. Hang Seng (-0.17%) and Shanghai Composite (+1.38%) diverged as the US President Trump and Chinese President Xi are preparing for their first face-to-face meeting scheduled on Thursday. Discussions could be tense between the two leaders, especially given Donald Trump’s unenthusiastic take against China.
The AUD/USD had a positive session in Sydney following five consecutive days of losses. The AUD-bears are willing to break the 200-day moving average (0.7552) support, before attempting to 0.7490 (March low).
The EUR/USD rebounded from 1.0635, after trading a stone’s throw higher than the 100-day moving average (1.0622). The French election polls suggest that Emmanuel Macron could win against the far-right, anti-EU candidate Marine Le Pen at the second and final round of the presidential election. As such, the French election worries do not currently weigh on the euro. The short-term resistance is presumed at 1.0700 (50% retracement on March rise), if surpassed, could encourage a further recovery toward 1.0750 (38.2% retracement). The Eurozone services PMI data is not expected to hide any surprises; the action on the USD market should determine whether the EUR/USD could consolidate and extend gains.
The 100-day moving average, 1.2410, continues lending support to Cable despite the Brexit volatility and traders’ reluctance to purchase the pound in the middle of the EU/UK shenanigans. From a technical perspective, daily trend and momentum indicators remain positive; suggesting that dip-buyers could continue seeing opportunity in dips pre-100-day moving average. The UK PMI services data is due at 09:30 London time. Analyst expectations are slightly optimistic; 53.5 versus 53.3 printed previously. A solid read could underpin the GBP-bulls and encourage a recovery to 1.2496 (minor 23.6% retracement on March rise), before the critical 200-day moving average, 1.2570, comes back in the radar. Below 1.2410, the GBP/USD should face the critical mid-term support at 1.2360 (50% retracement).
The EUR/GBP trades in the green for the third consecutive session. The cross is currently testing 0.8590/0.8596 (50-day moving average / 50% retracement on February-March rise) on the upside, if surpassed, should encourage a further rise to 200-day moving average, 0.8615.
The FTSE futures (+0.21%) traded upbeat in Asia, on the back of the recovery in oil and commodity prices. Copper futures gained 1.23%.
The barrel of WTI extended gains to $51.40, 100-day moving average, as the American Petroleum Institute announced that the US stockpiles decreased by 183000 barrel over the past week. The EIA report is due later in the session and is expected to print a decline as well.
Firmer oil and commodity prices hint at a slightly positive open in London. European stock markets are set for a flat open.