Rates: Underperformance US T-Note on US supply?
Today’s eco calendar is empty apart from a (heavy) start to the US’s mid-month refinancing operation. That could cause more underperformance of the US Note future against the Bund in an otherwise slow trading session. Trump’s protectionist trade policy remains a wildcard.
Currencies: EUR/USD topside better protected post-ECB?
On Friday, the payrolls failed to give clear guidance for the dollar. This week, the US data (CPI and retail sales) might be slightly USD supportive. We also keep an eye at ECB comments. More indications on ECB tapering beyond September might temporary take some shine off the euro.
The Sunrise Headlines
- US stock markets rose by 1.75% on Friday after the “goldilocks” US payrolls report. Asian stock markets trade around 1% higher this morning with Japan outperforming (+1.5%).
- Japanese FM Aso is coming under pressure to resign as a scandal over alleged favors to a school with connections to Japanese PM Abe deepened. He apologized and said that he is not thinking about resigning.
- American and European officials are planning new trade talks this week as US allies seek ways to avoid steel and aluminum tariffs. China signaled it is poised to retaliate if President Trump implements his “America first” economic action.
- The recent volatility in global financial markets should not deter top central banks from lifting interest rates or ending years of unprecedented stimulus, the Bank for International Settlements said.
- Philip Hammond said Britain may soon start to see the beginning of the end of austerity, as he prepares to announce the smallest deficit in a decade during his spring statement on Tuesday.
- Australia has secured an exemption from metals tariffs announced last week by US President Trump, PM Turnbull told the media.
- Today’s eco calendar only contains US auctions. The Treasury sells $28bn 3-yr Notes and $21bn 10-yr Notes
Currencies: EUR/USD Topside Better Protected Post-ECB?
US payrolls fail to give USD clear direction
On Friday morning, there was little follow-through action in EUR/USD after Thursday’s ECB meeting. US payrolls (strong job growth, but soft wages) caused only a subdued market reaction. EUR/USD filled bids in the 1.2275 area around the time of the publication, but the decline was blocked. EUR/USD closed at 1.2307. Strong US equities were basically neutral for EUR/USD, but kept USD/JPY well supported (close at 106.82).
Overnight, Asian equities join the post-payrolls rally from WS on Friday. In Japan there are plenty of headlines on a scandal regarding a land sale where PM Abe, his wife and the finance Ministry might to be involved. The headlines tempered initial market euphoria. Japanese equities returned part of the gains. The yen gained slightly ground, but remains within established ranges. The Australian dollar (AUD/USD 0.7869 area) rebounded after US president Trump gave the country an exemption to the steel and aluminum tariffs.
Today’s eco calendar is thin, but the US treasury will sell 3 and 10-yr bonds. Last month, US bond auctions were a factor of volatility for global markets. The potential impact on the dollar was/is ambiguous. The context now looks a bit less tense. Decent auctions shouldn’t be too bad for the dollar. US CPI and the retail sales might be important for the dollar later this week. Expectations for price data might be rather cautious after Friday’s wage data. Maybe there is room for some further dollar gains in case of decent US data. We also keep an eye at ECB comments. Will they give some hints on a tapering of APP after September? If so, it might cause some downscaling of euro longs. The US tariffs’ debate remains a wildcard for USD trading. Last week, EUR/USD showed no clear trend. The post ECB price action suggests that the EUR/USD topside is rather well protected for now. Constructive US eco data might cause a renewed EUR/USD test of the 1.2155 area.
At the end of last week, sterling succeeded a technical rebound as Brexit noise again subsided. The UK eco calendar is thin this week. For now there is no trigger for a clear directional move in EUR/GBP. Some further range trading near current levels might be in the cards
EUR/USD: topside better protected post-ECB?
