Action Insight

Developments in the financial markets in the last 24 hours were rather mixed. Firstly, oil prices reversed after the announcement of extension of production cut from oil producers. WTI crude oil dropped to as low as 48.21, comparing to this week's high at 52.00. Canadian Dollar followed lower but the sell off is limited so far. Secondly, US equities market strengthened overnight with S&P 500 gaining 0.44% to 2415.07. NASDAQ also rose 0.69% to close at 6205.26. Both indices made new record highs. DOW closed at 21082.95, 0.34%, inches below record high at 21169.11. US yields, on the other hand, stays soft with 10 year yield closed down -0.011 at 2.255. Gold is steady in range around 1250. Meanwhile, in the currency markets, Sterling plunged broadly after the downward revision in Q1 GDP released yesterday. Also, traders continue to lighten up positions as UK election in June approaches. Yen jumps broadly as Asian markets are in mild risk aversion. Dollar recovers but there is no sign of reversal yet as dollar index struggles below 97.50.

Dollar recovers in early US session after solid job data. Initial jobless claims rose 1k to 2.34k in the week ended May 20, below expectation of 238k. The four week moving averaged dropped to 235k, down from 241k. The average stands at the lowest level since 1973. Continuing claims rose 24k to 1.923m in the week ended May 13. Also from US, trade deficit widened to USD -68.0b in April. Wholesale inventories dropped -0.3% in April. Released earlier today, UK GDP growth was revised lower to 0.2% qoq in Q1, index of services rose 0.2% 3mo3m in March, BBA mortgage approvals dropped to 40.8k in April.

The market was disappointed over the FOMC minutes for the May meeting. While the minutes should be considered as a confirmation of a rate hike in June, it raised the uncertainty over the future rate hike path. The members appeared divided over the inflation outlook. While one camp was concerned over the impact of falling unemployment on inflation, another camp remained focused on the downside risk to inflation. Meanwhile, it is getting more likely that the balance sheet reduction might begin 'this year'.

Dollar stays generally soft as FOMC minutes delivered little surprise overnight. Fed is generally still expected to hike interest rate again in June. The plan for shrinking the balance sheet was outlined too. US equities were firm with DOW, S&P 500 and NASDAQ heading back to record highs. But treasury yields and Dollar didn't follow. The Dollar index is trading soft at around 96.9 at the time of writing as renewed strength in seen in EUR/USD in Asian session. The Dollar index is still on course for medium term fibonacci level at 96.46. Meanwhile, Canadian dollar jumps overnight as markets responded positively to BoC statement and strength in oil price.

Bank of Canada left the policy rate unchanged at 0.5% in May. Canadian dollar rallied to a 1-month higher against the US dollar after the announcement. Although the decision had been widely anticipated, traders were thrilled as policymakers acknowledged the strength in both global and domestic growth developments. The central bank also noted its expectations of 'very strong growth in the first quarter'. Yet, the abovementioned hawkishness was offset by concerns over subdued wage and price growth, leaving the overall statement neutral.

Dollar is trading in tight range today with mild strength against Japanese Yen and Swiss Franc. Markets are looking into today's FOMC minutes to solidify the expectation of a June Fed hike. Euro, despite the retreat against Dollar and Sterling, stays firm with near term bullish outlook. Meanwhile, the financial markets elsewhere are generally steady. European indices are weighed down mildly by news of Moody's downgrade of China, but loss is very limited. US futures are pointing to a flat open. Gold hovers in tight range around 1250.

US markets closed mildly higher overnight as investors were relieved that US President Donald Trump's first budget plan contained no surprise. DJIA closed up 43.08 pts, or 0.21% at 20937.91. S&P 500 gained 4.4 pts or 0.18% to close at 2398.42. Nikkei follows in Asian session and is trading up 100 pts at the time of writing. US 10 year yield also ended up 0.031 at 2.285. Dollar recovered as markets firmed up their expectation of a June Fed hike. Fed fund futures are pricing in 83.1% chance of that. In other markets, gold dips mildly but is holding above 1250 handle for the moment. WTI crude oil's recent surge is still in progress and is holding above 51.50. Focus will turn to FOMC minutes and BoC rate decision today.

Euro remains firm against most major currencies but is outshone by commodity currencies today. Solid economic data from Eurozone lifts sentiments with major European indices trading higher at the time of writing. US futures also point to higher open. Meanwhile, Dollar and Sterling remain the weakest major currencies for the week. The Greenback will need something drastic from either US President Donald Trump or FOMC minutes to halt it's decline against Euro and Swiss Franc. In other markets, gold is trading flat in tight range around 1260. WTI crude oil is losing some upside momentum but stays firm around 51.

Euro stays firm against Dollar and Sterling in Asian session but is losing some momentum against commodity currencies. Strength of the common currency is built upon optimism on Eurozone's economic outlook. And Euro will look into a string of data for further strength today, including PMIs and German IFO business climate. Meanwhile, Sterling stays as the weakest major currency as markets UK election and Brexit negotiation with EU are both approaching. Dollar, on the hand, stays soft too and didn't follow the rebound in stocks and yield. US President Donald Trump's first budget will also be a major focus today but it's unlikely to be inspirational.

Sterling trades broadly lower today on UK politics news. Prime Minister Theresa May's Conservatives was originally having over 20pts lead over Labour back when May announced the snap election back in April. But according to the latest Survation telephone poll, the lead halved to 9% only. The poll put Conservatives on 43% while Labour at 34%. The election is seen as an important step for May to gain solid mandate for Brexit negotiation. And a less than satisfactory result could weaken May's position.

Dollar recovers broadly in a quiet Asian session today but momentum is very week so far. The economic calendar is rather light today and trading might remain subdued. Nonetheless, volatility could build up again as the week goes with some key events scheduled. The list includes US budget proposal, FOMC minutes, BoC rate decision, Eurozone sentiment data, OPEC meeting, etc. While for now, some consolidations could be seen, the greenback will more likely extend recent fall ahead, than not. In other markets, Gold retreats mildly but is staying solid above 1250 handle. WTI crude oil extends recent rise and is on course for 53.76/55.24 resistance zone

Dollar was sold off broadly last week as sentiments were rocked by political turmoil in the White House, regarding US President Donald Trump's alleged intervention in FBI investigation. Selloff in equities triggered massive safe haven flows into Swiss Franc and Japanese Yen. But Euro followed closely as political risks in the Eurozone faded and on ECB expectations. Commodity currencies performed poorly in spite of the rally in oil and gold price. Aussie and Kiwi ended the week as two of the weakest major currencies, just next to Dollar. Sterling and Canadian Dollar were among the weakest batch too but showed a turnaround as oil broke 50 handle. Political uncertainty in US is set to continue as former FBI director James Comey, fired by US President Donald Trump earlier this month, agreed to testify in open session before the Senate Intelligence Committee. Dollar is vulnerable to more selling against Euro and Yen.

Euro extends recent rally against dollar today with EUR/USD hitting as high as 1.1188 so far. The common currency continues to draw support from expectation of a hawkish twist in ECB's June meeting. Also, based on recent solid economic data, there is realistic chance of upward revisions in the central bank's staff projections to be released at that meeting. Indeed, Euro's strength is even clearer considering that fact that it now overtakes Yen as the second strongest major currency for the week, following Swiss Franc. On the other hand, Dollar's recovery was weak and short lived as it's also back under some selling pressure against Sterling.

Dollar recovered mildly as markets calmed down from US President Donald Trump's political turmoil. But the greenback is still set to end the week as the weakest major currency. DOW also recovered overnight by adding 56.09 pts, or 0.27% to close at 20663.02 after suffering -372.8 pts loss on Wednesday. S&P 500 was up 8.69 pts or 0.37%, NASDAQ up 43.89 pts or 0.73%. 10 year yield also pared some loss and ended up 0.017 at 2.233, but was well off this month's high at 2.423. Gold retreats mildly after hitting as high as 1265 and is back below 1250 handle. WTI crude oil extended recent rise to 49.88 and is set to take on 50 handle today. In the currency markets, Swiss Franc and Japanese Yen remain the strongest ones on global risk aversion. That's closely followed by Euro as the third strongest, on optimism over Eurozone economy and anticipate of a hawkish twist in June ECB meeting. Commodity currencies are indeed generally weak with Kiwi and Aussie trading as the second and the third weakest ones.

Dollar is attempting a recovery today but stays weak against Japanese Yen. Risk aversion remains the main theme in the global financial markets with all major European indices trading in red at the time of writing. US futures also point to lower open. Upbeat economic data from US provide little support to the greenback as traders stay deeply concerned with US President Donald Trump's political turmoil. Initial jobless claims dropped 4k to 232k in the week ended May 13, better than expectation of 240k. That's also the lowest level in more than 28 years since 1973. Claims has now stayed below 300k handle for 115 straight week, longest stretch since 1970. Continuing claims dropped 22k to 1.9m in the week ended May, lowest since 1988. Continuing claims also stayed below 2m level for the fifth straight week. Philly Fed survey rose to 38.8 in May, beating expectation of 18.5.

USD's slump accelerated as increasing political uncertainty, accompanying disappointing inflation data, has intensified concerns over the country's growth outlook. Four consecutive days of selloff, accumulating loss of over -2%, has sent the DXY index to a 6-month low of 97.33 before recovery. Leading the rally against US dollar was the euro. With removal of one political risk after the French election, the market has turned its attention to the region's economy of which the development have been encouraging. Rebound in inflation and positive sentiment indices have raised speculations that the ECB would add some hawkish twists in its forward guidance. EURUSD has rallied as much as +2.7% over the past 4 trading days. The sustainability of the single currency's strength depends on the tone of ECB and FOMC meeting statements in June.

The financial markets are rocked as US President Donald Trump's political turmoil intensified. DOW dropped sharply by -372.82 pts, or -1.78% to close at 20606.93 overnight, the worst day since last September. S&P 500 lost -43.64 pts, or -1.82% to close at 2357.03. NASDAQ fell -158.63 pts, or -2.57% to close at 6011.24. Treasury yield also tumbled sharply with 10 year yield losing -0.113 to close at 2.216. Dollar is deeply and broadly sold off with the dollar index hitting as low as 97.33. Gold surges on Dollar weakness and breaches 1260 handle, comparing to last week's low at 1214.3. In the currency markets, Swiss Franc and Japanese Yen are trading as the strongest major currencies for the week on safe haven flow. But Euro is not far behind as the third strongest one.

Dollar's selloff continues today as markets are in deep concerned with US President Donald Trump's political turmoil. The situation worsens after a report that Trump has intervened in FBI investigation on national security adviser Michael Flynn. House Oversight Committee chair Jason Chaffetz, a Republican, requested FBI to hand over all records of correspondence between form FBI director James Comey and Trump, by May 24. Chaffetz tweeted that "@GOPoversight is going to get the Comey memo, if it exists. I need to see it sooner rather than later. I have my subpoena pen ready." Meanwhile, Russian President Vladimir Putin offered to provide US Congress with a record of Trump's meeting with Russian officials, just after firing Comey. It's reported that Trump passed highly sensitive classified information to Russia at the meeting.

Euro's rally extends in the Asian session today as optimism continues. In particular, EUR/USD reaches new six months high as the greenback is troubled by political turmoil in Washington. But we'd like to point out that Dollar's weakness is mainly centered against Euro, Swiss Franc and Yen. GBP/USD is held steady in range below 1.2987 resistance. While Aussie and Canadian are helped by commodity and energy prices, movements in AUD/USD and USD/CAD since last week are so far corrective looking. We'd continue to view the current theme in the markets as Euro strength rather than Dollar weakness.

Euro surges broadly today as incoming economic data is in line with a brighter outlook. Some attributes that rally in Euro to the weakness of Dollar. The greenback is pressured as the markets are getting more doubtful on US President Donald Trump's implementation of economic policy. For the very least, he is constantly being distracted by other issues, like currently, his firing of former FBI director James Comey and subsequent sharing of sensitive information with Russia. But it should be noted that both DAX and FTSE 100 hits record highs today. The moves in the markets are clearly driven by optimism. Released in US, housing starts dropped to 1.17m annualized rate in April while building permits dropped to 1.23m.