Sun, Sep 22, 2019 @ 06:49 GMT
Centrist independent Emmanuel Macron has won the French presidential election in a decisive victory. With virtually all votes counted, Macron has taken 66% of votes in the second round runoff, compared with far-right populist Marine Le Pen's 34%. While the election outcome had been suggested in the pre-election opinion polls, financial markets still reacted positively as defeat of Le Pen signaled a diminished risk of Frexit, a real concern haunting politicians and investors across the globe after the surprising Brexit referendum and Donald Trump's victory in US presidency. Despite her loss, it is the highest number of votes that far-right parties have ever received in modern French history. As she noted in the concession speech, she was 'designated the leading opposition force in this second round', Turnout of this election was 65.4%, 6.6 percentage points lower than that in the 2012 runoff and the lowest since the second round of the 1981 election. The total number of abstentions and spoiled votes, at 12 million, was greater than 10.7 million received by Le Pen, underpinning the general public's discontent over the current political and economic environment in France.
Dollar recovers broadly today as the markets are calmed down from the concerns over US-North Korea tensions. Meanwhile, Yen and Swiss Franc also soften mildly as a result. There was no further drastic development regarding the tension during the weekend. Chinese President Xi Jinping had a telephone call with US President Donald Trump on Saturday and urged a peaceful resolution to the issue, and all sides to avoid words or actions that escalate the tensions. Focus will temporary turn back to minutes of Fed, RBA and ECB, as well as a large number of global economic data. But markets will also keep one eye on the US-North Korea development.
Dollar weakens broadly after FOMC rate decision that provides little news to the markets. Instead, traders are keen awaiting US President Donald Trump's announcement on nominating Fed Governor Jerome Powell to take over Fed chair job next year. The announcement is expected at 3pm New York Time today. Also, after a day of delay, House is set to reveal the details of the tax bill. But the greenback could continue to stay in range and wait for tomorrow's non-farm payroll report. Meanwhile, Sterling remains the strongest one for the week as markets await the highly anticipated BoE rate hike.
Dollar's broad based selloff resumes today as traders hit the accelerator. The key factors behind are improving economic outlook in other major economies. At the same time US Treasury Mnuchin's backing of a weaker dollar is triggering the acceleration. While economic data from Eurozone continued to be solid, it's following Dollar as the second weakest one. Sterling emerges as the strongest one today as data suggest faster wage growth. Aussie and Kiwi come as second and third.
Sterling dips notably against other major currencies in an other wise rather quiet Asian session. Selloff in the Pound is seen as a reaction to news that Prime Minister May is preparing for Scotland to call for another independence referendum. And that would come as May triggers the Article 50 for Brexit negotiation with EU by the end of March. It's reported that May could agree to the vote on condition that it happens after completing the Brexit process. While Sterling weakens broadly, it's so far kept well in range against Dollar and Euro. The larger move is seen in GBP/JPY which is heading back to 138.53 support.
The financial markets are generally staying in tight range in Asian session today as traders await the heavy-weight events later in the week. US equities ended mixed overnight with DJIA closed down -22.5 pts, or -0.1% at 20881.48. S&P 500, on the other hand, gained 0.87 pts, or 0.04%, to close at 2373.47. Treasury yields also rose with 30 year yield gained 0.023 to close at 3.192. Meanwhile, 10 year yield gained 0.026 to close at 2.608. But both are limited below recent resistance at 3.197 and 2.621 respectively. Gold is trying to regain 1200 handle for the moment. WTI crude oil turned sideway after breaching 48 handle briefly. Dollar index is trying to draw support from 55 day EMA and is trading at 101.40 at the time of writing. Forex pairs are all trading inside Monday's range.
US indices closed at new record highs again as led by defense and energy sectors. In particular, WTI crude oil surged to as high as 54.68 and is showing sign of range breakout. That helped lift DJIA up 118.95 or 0.58% to close at 20743.00. S&P 500 gained 14.22 pts or 0.60% to close at 2365.38. NASDAQ also rose 27.37 pts or 0.47% to close at 5865.95. Dollar index was lifted by hawkish comments from Fed officials and reached as high as 101.60. However, the index lost momentum ahead of 101.76 near term resistance.
Dollar is set to end the week as the second weakest currency as slightly better than expected growth data provides little support. Q2 GDP grew 2.6% annualized, up from prior 1.4% and versus consensus of 2.5%. However, GDP price index slowed to 1.0%, down from 1.9% and below expectation of 1.3%. Employment cost index rose 0.5% in Q2, also below expectation of 0.6%. Subdued inflation will affirm the case for Fed to starting shrinking the balance in September first, and leave another rate hike to December. This will give Fed more time to assess inflation and growth outlook before raising interest rates. Also from US session, Canada GDP rose 0.6% mom in May, much stronger than expectation of 0.2% mom.
Euro recovers broadly today as markets are looking past the political turmoil in Spain, with focus back on ECB and economic outlook. European markets, except Spain, are steady with Germany on holiday. At the same time, thousands of people protest in Barcelona against police violence during the referendum on Catalonia independence on Sunday. The European parliament will be holding a special session on the issue tomorrow and European commission spokesman Margaritis Schinas urged that "violence can never be an instrument in politics". Elsewhere, Sterling is trading as one of the weakest one today after shockingly bad construction data. Dollar stays firm but struggles to find follow through buying.
Dollar is paring some gains today but it remains the strongest major currency for the week so far. While bond yields remains firm today, the greenback is losing some momentum. Euro and Sterling are trading firmer while commodity currencies remain weak. Released from US, initial jobless claims rose 12k to 272k in the week ended September 23, above expectation of 269k. Continuing claims dropped -45k to 1.93m in the week ended September 16. Trade deficit narrowed to USD -62.9b in August. Wholesale inventories rose 1.0% in August. Q2 GDP was revised up to 3.1% with price index unchanged at 1.0%.
Dollar remains the weakest one and is under broad based selling pressure. Mixed economic data from the US provides little support to the greenback. Headline PPI rose 0.4% mom, 2.7% yoy in January, versus expectation of 0.4% mom, 2.5% yoy. Core PPI rose 0.4% mom, 2.2% yoy, versus expectation of 0.2% mom, 2.1% yoy. Empire state manufacturing index dropped to 13.1 in February, below expectation of 18.0. Philly Fed survey rose to 25.8, above expectation of 21.6. Initial jobless claims rose 7k to 230k in the week ended February 10. 1.2537 is a key level to watch in EUR/USD today.
The forex markets open the week rather steadily. Sterling is trying to extend last week's late rally but is held below Friday's high for the moment. It will be a big week for the Pound with inflation, employment and sales data featured. Meanwhile, UK Prime Minister Theresa May is trying her last effort to break that deadlock in Brexit negotiation ahead of the crucial EU summit on October 19. Dollar, on the other hand, is mildly firmer, recovering some of the post CPI loss.
As widely anticipated, RBNZ left the OCR unchanged at 1.75% and maintained the neutral bias in the monetary policy stance. Domestic economic developments remained upbeat with rising inflation and positive growth outlook. Policymakers attributed weaker-than-expected 4Q17 GDP to temporary factors. The central bank acknowledged the recent depreciation in trade-weighted exchange rate. Yet, it reiterated that a weaker kiwi would be needed for more balanced growth. RBNZ warned that geopolitical uncertainty remained the biggest challenge in the global economic development. We expect RBNZ would stand on the sideline throughout the year.
Dollar is trading mixed in spite of up beat US economic data and hawkish Fedspeaks. Empire state manufacturing index jumped to 30.2 in October, up from 24.4 and beat expectation of 20.7. That's also the highest level in three years. Boston Fed President Eric Rosengren sounded rather hawkish in an interview. He mentioned that Fed will need to hike interest rate December, and then three to four times "over the course of next year". He pointed out that unemployment rate, current at 4.2%, could drop below 4% when the economy is overheating. And in that case, Fed "might have to overshoot" interest rate to a level higher than expected in a healthy economy.
While oil prices and Canadian Dollar took headlines, it's indeed the Euro that's the outstanding one in the early part of the week. The common currency resumed recent rally against dollar is back above 1.1 handle. Markets are getting more optimistic that subsiding political risks in the Eurozone clear up uncertainties over economic outlook. And recent solid economic data also pointing to better momentum in the recovery. If the developments continue, it's more likely that finally see the start of the end of ECB's stimulus after the current asset purchase program ends at the end of the year. But for sure, it's still too early to confirm anything, at least not before new staff economic projections from ECB to be published in June.
Dollar is given a lift in early US session by a set of overall solid employment. After initial hesitation, the greenback is gaining some upside momentum with GBP/USD dropping through 1.3096 minor support. USD/CHF also breaks last week's high at 0.9726 to resume rebound from 0.9347. Focus will now turn to 110.97 minor resistance in USD/JPY and break there will indicate near term bottoming. EUR/USD, though, stays firm above 1.1722 minor support and it's near term bullishness remains relatively safe.
US stocks extended the record run overnight as Trump trade remained in force. DJIA closed up 142.79 pts or 0.70% at 20412.16. S&P 500 rose 12.15 pts, or 0.52% to end at 2328.25. NASDAQ gained 29.83 pts or 0.52% to 5763.96. All three indices closed at record highs. Treasury yields also increased mildly but stayed in familiar range. 10 year yield rose 0.025 to end at 2.434. Dollar followed higher with the index hitting 101.11 and breached 101.02 resistance. But there is no sustainable momentum above this resistance yet. In the currency markets, Yen remains the weakest major currency on risk appetite. Euro follows as the second weakest on worries over political situations in Europe. The economic calendar is very busy today but main focus will be on Fed chair Janet Yellen's semiannual testimony to the Senate.
ECB left the monetary policy and the QE program unchanged in April. That is, the main refi rate, marginal lending rate and the depo rate stayed unchanged at 0%, 0.25% and -0.40%, respectively. Meanwhile, the asset purchase program would be continued at the pace of 60B euro per month from this month, through to the end of December 2017, or beyond, if necessary.
The forex markets opened the week relatively quietly with the exception of Australian Dollar. Aussie dives broadly after weak retail sales data and stays weak ahead of RBA rate decision. Meanwhile, Yen follows as the second weakest as Tankan survey showed less than expected improvements in sentiments. On the other hand, Euro is paring some of last week's loss. Focus will turn to French elections in April. Dollar is trading mixed ahead of a string of important economic data. That starts with ISM manufacturing today, ISM services on Wednesday and non-farm payroll on Friday. Fed will also release March FOMC meeting minutes this week.
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.
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