FTSE +17 points at 7314
DAX +73 points at 12790
CAC +18 points at 5450
Euro Stoxx +17 points at 3675
The risk-on environment pushed the global indices and equity futures higher. Nikkei and Topix rallied past 2%, as gold, yen and the franc retreated. Australia’s ASX gained 0.50% despite a failed recovery attempt on iron ore prices. Shanghai’s Composite (-1.03%) diverged negatively, as data showed that Chinese exports grew by 8% year-on-year in US dollar terms, from 16.4% printed a month earlier. The trade surplus improved to $38.05 billion from $23.92.
The CAC and the DAX are set for a positive open following Emmanuel Macron’s solid victory against Marine Le Pen in the final round of the French presidential election that took place on Sunday May 7.
Emmanuel Macron won the presidential election with 66.1% of the votes, a very solid victory which proved to be better than the most Macron-positive poll (62%). The EUR/USD gaped higher at the open, yet the upside remained capped at 1.1023, given that the Macron-win was fully priced in prior to the final vote. Top sellers jumped in to bring the pair back below the 1.10 mark, which has been breached for the first time since November. The ‘buy-the-rumour-sell-the-fact’ and the profit taking could encourage a deeper short-term correction to 1.0915 (minor 23.6% retracement on April – May rise), and 1.0849 (major 38.2% retrace).
A consolidation in the EUR/USD could be healthy before a fresh leg up. Against the safe haven currencies, the euro should extend gains on higher allocation from risk averse traders. The EUR/JPY should challenge the 125.00 level for the first time in more than a year, while the EUR/CHF should consolidate and extend gains with support at the 100-week moving average (1.0820).
Oil rebounded after Iran stated that it will comply with any OPEC decision regarding an eventual production cut at the May 25th meeting. WTI traded at $47/barrel in Asia, after having bottomed at $43.90 on May 4th. The recovery could extend past the $50 level, as the period until the next OPEC meeting will likely be an interesting playground for speculators. We remind that the speculative oil positions are sufficiently short, hinting at the possibility of a short-term unwind.
Iron ore futures recorded a failed recovery attempt, copper futures softened nearly 1%.
The GBP/USD strengthened to 1.2989. It is just a matter of time before the 1.30 resistance is tested. On Thursday, the Bank of England (BoE) will deliver its first verdict since the announcement of the June 8 snap election. The quarterly Inflation Report (QIR) could reveal an upside revision to the inflation forecasts, yet the BoE is set to maintain its soft growth forecast, due to the Brexit.
According to the latest figures, the UK’s GDP growth may have eased to 0.3%q/q in the first quarter, down from 0.7% printed previously and versus 0.4% expected by analysts. Soft data may refrain the BoE members from shifting toward the hawkish camp. The BoE is expected to maintain the status quo 9 to 1; Kristen Forbes could bring the rising inflationary pressures on the table.
The FTSE is expected to open firmer in London, yet could find it hard to preserve gains, if the GBP/USD paves its way above the 1.30 mark. Rebound in oil prices could be jeopardized by stronger pound and softer commodities.
Released on Friday, the US nonfarm payrolls (211K) beat the expectations (109K) in April. The unemployment rate unexpectedly improved from 4.5% to 4.4%, the average monthly earnings remained unchanged at 0.3% month-on-month. Average earnings on yearly basis eased to 2.5% from 2.7% printed a month earlier. The satisfactory jobs data gathered little momentum on the upside. In fact, the market was already heavily positive in US dollar following last week’s Federal Reserve (Fed) policy meeting. Currently, the market assesses 100% probability for a June rate hike.
Gold extended losses to the 100-day moving average ($1,220). Improved global risk appetite and higher US yields could drive more capital from the non-interest bearing gold to better yielding fixed-income assets. Sellers are touted below $1.238 (minor 23.6% retracement on April – May decline) and $1,249 (major 38.2% retracement) for a further slide toward the $1,200 mark.
Quick glance at technicals on LCG Trader:
EUR/GBP intraday: Long positions above 123.40 (pivot) with targets at 124.05 & 124.35 in extension. Below 123.40, downside potential to 122.95 & 122.55.
GBP/USD intraday: Long positions above 1.2940 (pivot) with targets at 1.2990 & 1.3020 in extension. Below 1.2940, downside potential to 1.2925 & 1.2900.
Copper intraday: short positions below 2.6200 (pivot) with targets at 2.4400 & 2.3790 in extension. Above 2.6200, upside potential to 2.7170 & 2.8180.