Thu, Jun 20, 2019 @ 17:15 GMT
Dollar trades mixed in early US session with notable weakness against Euro and Swiss Franc. The forex markets are relatively steady elsewhere, with Aussie and Loonie trading to recover while yen extends its pull back. US initial jobless claims rose 10k to 244k in the week ended April 15, slightly above expectation of 241k. Continuing claims dropped -49k to 1.98m in the week ended April 8, lowest since April 2000. Philly Fed survey dropped to 22.0 in April, down from 32.8, below expectation of 25.6. In other markets, US futures point to a mildly higher open and stocks could pare back some of yesterday's steep loss. Gold is hovering around 1280 while crude oil is heading to test 50 psychological level. .
Markets continue to trade generally calmly for the moment. US equities turned mixed overnight with DJIA losing another -118.79 pts or -0.58% to close at 20404.49. S&P 500 dropped -4.02 pts or -0.17% to close at 2338.17. NASDAQ, however, gained 13.56 pts or 0.23% to close at 5863.03. Asian stocks are steady in tight range as Nikkei and HK HSI recover with slight gain. US treasury yield also stabilized with 10 year yield closing up 0.023 at 2.202. Gold continues to feel heavy ahead of 1300 handle and dips through 1280 handle briefly. The selloff in WTI Crude oil is more apparent as it reaches as low as 50.09, comparing to last week's high at 53.76. In the currency markets, commodity currencies are trading generally higher. New Zealand dollar is given additional boost from inflation data. Japanese Yen, on the other hand, trades broadly lower with Dollar for today.
Markets are stabilizing from yesterday's sharp volatility. Major European indices are trading in tight range with DAX and CAC holding mild gains at the time of writing. US indices also open nearly flat and are bounded in tight range. In the currency markets, Dollar recovers broadly today but is staying deep in red against European majors for the week. Commodity currencies remain broadly weak too. Sterling remains the strongest major currency this week even though it's paring some gains against Dollar and other Europeans. In other markets, Gold is trading lower by at it continues to struggle to find buying to push through 1300 handle. WTI crude oil is also staying in consolidation.
Markets are generally trading in risk averse mode after UK Prime Minister Theresa May's surprised call for snap election. That also adds to the backdrop of geopolitical tensions in North Korea and Syria. DJIA closed down -113.64 pts or -0.55% at 20523.28. S&P 500 lost -6.82pts or -0.29% to close at 2342.19. Nonetheless, both indices are still trying to draw support from 55 day EMA. In Asian session, China leads other Asian markets lower as SSE composite index drops -40 pts or -1.23% at the time of writing. Hong Kong HSI is losing -150 pts or -0.63%. Nikkei, however, recovers and is trading up 0.2% at the time of writing.
Sterling jumps broadly today as currency markets respond positive to UK Prime Minister Theresa May's call for a snap election this June. GBP/USD powers through 1.2614 near term resistance and reaches as high as 1.2695 so far. GBP/JPY also took out 137.51 near term resistance which now suggests trend reversal. FTSE 100, however, is trading down -1.8% as stocks investments clearly dislike the uncertainties. Meanwhile, Euro also follows the Pound higher as markets are calm on French election. US Dollar, on the other hand, reversed earlier gains, against European majors but stays firm against commodity currencies.
Dollar and US equities came back from holiday stronger. The markets are looking through the geopolitical uncertainties in North Korea. Instead, they listened to comments from US Treasury Secretary Steven Mnuchin. Mnuchin conceded that completing tax reforms through Congress before August deadline was "highly aggressive to not realistic at this point". However, he noted that it would "probably delayed a bit" because of the healthcare. Meanwhile, he noted that the border-adjustment tax, seen as a sticking point among Republicans, could be excluded in the tax reform.
Worries on geopolitical tensions and US policies were the two main forces driving the markets in a holiday shortened week. Yen surged broadly and the relative strength to Swiss Franc argues that worries are mainly on the tensions in Korean Peninsula. The rally in Yen was also accompanied safe haven flows into US treasuries. Long term yields tumbled sharply to the lowest level this year, breaking key near term support levels. Gold surged to as high as 1290.7 and is having its sight on 1300 handle. WTI crude oil also extended recent rise before losing some momentum ahead of 55.24 resistance. In the currency markets, Dollar ended as the weakest major currency as talked down by US President Donald Trump, and dragged down by falling yields. Euro ended as the second weakest ahead of French presidential election and dragged down the Swiss Franc.
Dollar is recovering against European majors in early US session but stays weak against commodity currencies. The greenbacks is still trading as the weakest major of the week, troubled by comments from US President Donald Trump regarding it's strength. Released from US, initial jobless claims dropped 1k to 234k in the week ended April 8, below expectation of 245k. It's the 110 straight week of sub-300k reading, longest streak since 1970 and indicates a healthy job market. Continuing claims dropped 7k to 2.03m in the week ended April 1. PPI, however, dropped -0.1% mom March but accelerated to 2.3% yoy. PPI core rose 0.0% mom, and accelerated to 1.6% yoy. Both PPI and core PPI missed expectations. From Canada, new housing price index rose 0.4% mom in February. Manufacturing shipments dropped -0.2% mom. Release in European session, Swiss PPI rose 0.1% mom 1.3% yoy in March. German CPI was finalized at 0.2% mom, 1.6% yoy in March.
US Dollar tumbled broadly and is now trading as the weakest major currency after US President Donald Trump talked down the exchange rate. The Dollar index reaches as low as 100.01 so far. It's still holding on to 100 handle mainly thanks to the relative weakness of Euro, who's trading as the second weakest one. But this 100 psychological level looks vulnerable. Commodity currencies are broadly higher. Canadian Dollar maintains post BoC gains. Aussie is lifted by strong employment data. Yen pares back some gains but remains the strongest one for the weak on falling treasury yields. US 10 year yield closed at 2.296 and is now close to last week's low at 2.271. In other markets, Gold is staying firm at 1287 at the time of writing. But it's starting to feel a bit heavy ahead of 1300 handle, as risk aversion eases. WTI crude oil also retreats mildly and is back at around 53.
Canadian Dollar surges sharply on upbeat Bank of Canada statement. BoC left overnight rate target unchanged at 0.50% as widely expected. The central bank noted in the accompany statement that "recent data indicate that economic growth has been faster than was expected in the January MPR". Growth for 2017 through 2019 is expected to "remain above potential". Real GDP growth is projected to 2.5% in 2017, revised up from January projection of 2.1%. Inflation, however, is expected to dip in the months ahead but return to 2% target as the "output gap closes". And BoC concluded by noting that it "acknowledges the strength of recent data, some of which is temporary, and is mindful of the significant uncertainties weighing on the outlook."
The financial markets are clearly in risk averse mode on escalating geopolitical tensions. Gold jumps to as high as 1281.8 so far, comparing to last week's close at 1257.3, and is heading towards 1300 handle. WTI crude oil also extends recent rally to as high as 53.6, still on course to 55.24 key resistance. Safe haven flows into US treasury also pushed yield lower with 10-year yield losing -0.063 to close at 2.298. And 10-year yield is now having last week's spike low at 2.271 in sight. Reactions in stock were relatively muted as DJIA dipped to 20512.56 but closed at 20651, down just -0.03%. Though, notable weakness is seen in Nikkei as it's trading down -1.2% at the time of writing.
Euro recovers today as lifted by German investor sentiment data. Meanwhile, Dollar softens broadly after uninspiring comments from Fed chair Janet Yellen. German ZEW economic sentiment rose to 19.5 in April, up from 12.8, beat expectation of 14.8. That's also the highest level since August 2015. Current situation assessment rose to 80.1, up from 77.3, beat expectation of 80.1. ZEW President Achim Wambach said that the "German economic situation has proved fairly robust in the first quarter" And, that was highlighted by "solid figures for growth in industrial production, the construction sector and retail sales from February." Also, "consistently high labour demand has boosted private consumption." Eurozone ZEW economic sentiment rose to 26.3, up from 25.6, beat expectation of 25.0. Also from Eurozone, industrial production dropped -0.3% mom in February versus expectation of 0.1% mom rise.
Some selling pressure is seen in Euro in Asian session as the common currency is dipping through Monday's low against Yen and Sterling. French election in April and May is the main focus for the common currency for now. But it should be noted that instead of political uncertainties, Euro's current selloff is more due to adjustments on ECB expectations. That is, there is little chance for ECB to raise interest rate soon in spite of the "hawkish twist" back in March. There are talks that Euro could be given a lift after French election but that would likely be just temporary. The situation of the British Pound is indeed quite different as Sterling has survived news of Brexit and stayed firm. BoE outlook is the main support for the Pound as Kristin Forbes voted for a rate hike back in March. And that was accompanied by stronger than expected February headline inflation reading. UK CPI release today will be importantly to decide whether Sterling can hold on to its resilience.
The Japanese Yen is trading as the weakest major currency today as it's paring back this month's gain. Canadian Dollar is so far the strongest one for the day as supported by strength in oil price. Dollar attempted to extend Friday's rally earlier today but no follow through buying in seen yet. Meanwhile, Euro is weighed down mildly by news on French presidential election. Overall, trading activity is quite subdued today as traders are probably starting preparing for holiday and long weekend ahead.
Dollar edges mildly higher in early Asian session today but quickly turned mixed. The greenback is somewhat supported by comments from Fed officials. St. Louis Fed President James Bullard echoed some other officials and said Fed could start winding down its $4.5T balance sheet later this year. But in that case for Bullard, it would become less necessary to raise interest rate. On the other hand, New York Fed President William Dudley said on Friday that shrinking the balance sheet would only prompt a "little pause" in tightening.
"The market is always right". That's by no means saying that the market is efficient, that's a topic for the academics. But, the market always move with certain underlying forces. We may or may not always understand why stocks, yields, currencies commodities move that way. It doesn't matter. And indeed, the voice of the market is usually the loudest when it does something that doesn't make sense. It's up to us to hear it or ignore it. And, reading news is not about reading the news but the reactions to the news. It's our choice to see the reactions, or just to criticize the reactions.
US non-farm payroll report comes in much weaker than expected. Only 98k jobs were created in March, around half of expectations of 177k only. Prior month's figure was also revised down from 235k to 219k. Unemployment rate dropped 0.2% to 4.5%, hitting the lowest level in nearly 10 years. Average hourly earnings posted 0.2% mom rise in March, below expectation of 0.3%. Released from Canada, employment rose 19.4k in March versus expectation of 5.7k. Unemployment rate rose to 6.7%. Notable weakness is seen in USD/CAD after the releases, as Canadian dollar is additionally supported by surge in oil price. Some buying is seen in the Japanese yen, on risk aversion and possibly on expectation of fall in treasury yields too. Meanwhile, dollar is so far steady against European majors.
Risk aversion comes back to drive the market as US President Donald Trump, while he was meeting with China President Xi Jinping, ordered air strike on Syria. That was in response to Syrian government's use of chemical weapons on civilians. Nikkei reversed earlier gains and is trading in red at the time of writing while Hong Kong HSI is trading down -1%. Most Asian indices are generally in red. Gold soars through 1270 to as high as 1271.5 and takes out resistance at 1264.9 firmly. WTI crude oil surges to as high as 52.94, comparing to yesterday's close at 51.70. In the currency market, renewed buying is seen in the Japanese yen and Swiss Franc. Canadian Dollar decouples with Aussie and Kiwi thanks to oil prices.
Dollar trades in rather tight range as the markets await the summit between US President Donald Trump and China President Xi Jinping. They will greet each other at Trump's Mar-a Lago retreat in Florida late in the afternoon and dine together. The summit will conclude with a working lunch tomorrow. Pressure is on Trump's shoulder to deliver something concrete out of the meeting. Those would include bringing jobs "stolen" by the Chinese back to the US, ending China's "currency manipulation", push China to use its "great influence" on North Korea, etc. Some market participants might have high expectation on the outcome of the summit. But other might just prefer Trump to move his focus back to tax reform, which is, in our view, more essential in determining the financial markets' direction.
The tones in the financial markets remain unchanged for the week. US equities attempted for a rally overnight. DJIA surged initially on strong US ADP employment and reached as high as 20887.50. But the index then reversed to close down -0.20%, or -41.09 pts, at 20648.15. The hawkish FOMC minutes are seen as a factor weighing on sentiments. But more importantly, House speaker Paul Ryan's comments on tax reform further reduced market confidence on US President Donald Trump's ability to implement what he promised. 10 year yield closed mildly higher by -0.007 at 2.357 but it's kept in tight range well below 55 day EMA. In the currency markets, Japanese yen strengthens again on risk aversion is remains the strongest major currency for the week. Commodity currencies are suffering renewed selling in Asian session. Dollar and Euro are trading mixed.
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