Sample Category Title

USD/JPY - 112.22

Original strategy  :

Buy at 111.55, Target: 112.55, Stop: 111.20

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 111.55, Target: 112.55, Stop: 111.20

Position :  -

Target :  -

Stop : -

As the greenback has surged again after brief pullback and broke above previous resistance at 111.74, adding credence to our view that recent upmove is still in progress and bullishness remains for further subsequent gain to 112.50-60 but near term overbought condition should limit upside to 112.80 and price should falter below 113.00-10, risk from there has increased for a retreat to take place later.

In view of this, would not chase this rise here and would be prudent to buy dollar on subsequent pullback as 111.50-55 should limit downside. Below support at 111.21 (yesterday’s low) would abort and suggest a temporary top is formed instead, bring correction towards 110.87 support.

USDJPY: The pair continues to hold on to its upside pressure leaving more strength expected. On the downside, support comes in at the 112.00 level where a break if seen will aim at the 111.50 level. A cut through here will turn focus to the 111.00 level and possibly lower towards the 110.50 level. On the upside, resistance resides at the 112.50 level. Further out, we envisage a possible move towards the 113.00 level. Further out, resistance resides at the 113.50 level with a turn above here aiming at the 114.00 level. On the whole, USDJPY looks to recover further higher.

The potential threat of complications and confrontations during Brexit negotiations could rekindle hard Brexit fears and expose Sterling to downside risks this quarter. Some difficulties have already materialized in the early stages of Brexit talks with European Commission President, Jean-Claude Juncker recently commenting that Theresa May is "living in another galaxy", leaving investors anxious. Theresa May repeating her threats of walking away from the European Union without a deal has contributed to uncertainty, and as such Sterling vulnerability could become a dominant theme.

There is a growing suspicion that the European Union may exploit the complicated process of Brexit negotiations to demonstrate to other members that leaving the single bloc may come with heavy consequences. With Brexit developments and ongoing political instability likely to weigh on sentiment, sellers may attack the Pound moving forward.

Focusing on the macro fundamentals, Sterling popped higher during Tuesday's trading session after UK manufacturing surged to a three-year high in April at 57.3. A vulnerable Pound boosted the competitiveness of British products globally, and with manufacturing accounting for 10% of the economy, a solid release was warmly received. Although Sterling could find itself supported in the short term, the upside may be limited, especially when considering how the toxic combination of accelerating prices and Sterling weakness continues to impact consumers.

From a technical standpoint, Sterling/Dollar is bullish in the short term with the breakout above 1.2875 opening a path towards 1.3000. If bulls fail to conquer the 1.3000 level, then prices may descend back towards 1.2875 and 1.2775 respectively.

Stock markets buoyed by earnings

Global stocks crept higher on Tuesday as investors looked beyond the ongoing geopolitical tensions and uncertainty, focusing on stronger corporate earnings. Asian stocks concluded mixed during early trading on Tuesday with some investors on the fence after soft economic data from China rekindled concerns about the global economy. In Europe, equities opened cautiously higher as participants prepared for an explosive data-packed week with the Fed meeting, U.S Jobs data and the French presidential elections in the limelight.

Although Wall Street may find itself supported by earnings, an air of caution permeating the financial markets may cap gains. With uncertainty still lingering over Trump's economic policies, geopolitical tensions in the background, and depressed oil prices weighing on sentiment, the "sell in May and go away" strategy could become attractive to anxious investors.

Dollar losing its attitude

Dollar bears have been unleashed by the recent string of soft economic data from the U.S, leaving investors questioning whether the Federal Reserve will raise U.S interest rates again this year. The Trump rally continues to display signs of exhaustion as scepticism mounts over Donald Trump's ability to move forward with the proposed fiscal spending. Although markets reacted to a big tax announcement last week that offered little detail on the tax reform, it must be kept in mind that support for the proposed reforms does not mean they will be passed through congress.

Much attention may be directed towards the Federal Reserve meeting and U.S jobs data this week which could create some Dollar volatility. While markets widely expect the Federal Reserve to leave interest rates unchanged in May, investors may scrutinize the meeting's tone for any clues or confirmation of a June interest rate increase.

Commodity spotlight - Gold

Gold bulls have succumbed to selling pressure by losing the battle to defend the $1260 support. While the metal could still be supported by risk aversion in the medium to longer term, the break below $1260 may entice sellers to send prices towards $1240. The metal may be subject to volatility this week with the Federal Reserve meeting on Wednesday, and NFP on Friday acting as prime drivers. From a technical standpoint, previous support around $1260 may transform into a dynamic resistance that opens a path towards $1240. In an alternative scenario, a daily break back above $1260 could provide bulls the opportunity to challenge $1280.

This morning, the Reserve Bank of Australia (RBA) announced interest rates on hold at 1.5%, which was in line with market expectations.

The RBA sees an upswing in the global economy, and foresees the Australian economic growth to increase gradually around 3% over the next couple of years, helped by the rising mining investment and exports of resources.

In terms of labour market, the unemployment rate is expected to drop over time. However, wage growth remains slow.

Overall, the economic outlook is sound, nevertheless, the bullish momentum of the Aussie will likely be restrained due to the concern over the slow wage growth.

AUD/USD has rebounded after hitting the lowest level of 0.7439 since January 12 on April 27.

The RBA's sound economic outlook lifted AUD/USD touching a 1-week high of 0.7555 in early hours of this morning, testing the near-term major downtrend line resistance.

However, the price has retraced as the pressure at the level is heavy.

The 4-hourly Stochastic Oscillator Is heading downward, suggesting further retracement.

The resistance level is at 0.7530, followed by 0.7550 and 0.7560.

The support line is at 0.7510, followed by the psychological level at 0.7500 and 0.7485.

The FOMC meeting will be held on Wednesday May 3. Markets expect the Fed to raise rates in June instead of May. Nevertheless, we might get further clues about the probability of a rate hike in June from Fed Chair Yellen's tone of her speech. The recent weak US economic data might make Yellen's speech less hawkish. Per the CME's FedWach tool, the probability for a rate hike in June is 67.4%.

Be aware that Yellen's speech will likely cause volatility for USD and the USD crosses. With a dovish statement, it will likely weigh on USD and push AUD/USD up. With a hawkish statement, it will likely strengthen USD and weigh on AUD/USD.

The pair continues to head lower following last week's break below key med-term support at 3.5555 (23 Feb low) and break below pivot at 3.5487 (Fibo 38.2% of 2.9135/2.9414 ascend) which are signaling further extension of corrective phase from 3.9414 (11 Jan record high). Multiple bear-crosses of daily MA's as well as Tenkan-sen/Kijun-sen lines maintain strong downside pressure, which is reinforced by completion of bearish pennant pattern. Further weakness may test psychological 3.5000 support, however, bears could be interrupted by correction on strongly oversold slow stochastic on daily chart, which is so far lacking firmer bullish signal. Falling daily Tenkan-sen offers solid barrier (currently at 1.6019) which should ideally cap and keep intact last week's high at 3.6244 (posted after gap-lower opening).

Res: 3.5553, 3.5850, 3.6000, 3.6244
Sup: 3.5300, 3.5124, 3.5000, 3.4850

• EUR and GBP gain on multi-year highs for UK and eurozone manufacturing PMIs;
• French election to remain in focus ahead of this weekend's vote;
• Fed decision key this week despite rate hike being all but priced out.

US equity markets are on course to open flat on Tuesday following a decent start in Europe where indices are currently posting moderate gains.

Europe has been given a boost this morning by the better than expected April manufacturing PMI data for the eurozone and the UK. The final eurozone PMI release hit a six year high while the UK rebounded from three months of declines to record its fastest growth in three years. Both currencies are making decent gains this morning on the back of the data and could test last week's highs, with both trading near key technical resistance levels. A break of these could spur further gains in the coming weeks.

While traders continue to have one eye on the data, the French election is likely to remain at the forefront of their minds this week, with the second round of voting taking place this weekend. Emmanuel Macron remains the runaway favourite in the polls which is supporting risk appetite at the moment but traders may retain a slightly cautious approach given the experience of last year's voting in the UK and the US.

Earnings season continues to be another key focus for investors and this week we'll also get the latest monetary policy decision from the Federal Reserve as well as the April jobs report. While a rate hike at the meeting tomorrow is all but priced out, the probability of one at the meeting in June is currently just shy of the 70% level that is widely seen as the threshold for such a move. Tomorrow's statement will therefore be very closely monitored in the absence of a press conference from Chair Janet Yellen.

China's latest set of PMI data indicated slowdown in the country's activity growth. The official manufacturing index was reported to have dropped -0.6 point to 51.2 in April, whist the non-manufacturing PMI declined -1.1 points to 54 for the month. The slowdown was broadly based: the 'output' index slipped -0.4 point to 53.8 and the 'new orders' index dropped -1point to 52.3. The 'new export orders' index fell for the first time in 4 months, losing -0.3 point to 50.5, although the three-month moving average remained up. The 'input price' index sank -7.5 points to 51.8. The trend indicates that PPI inflation should have slowed more sharply in April. Recall that the March reading was +7.6% and the February reading was a record higher of +7.8%. The only sub-index that has shown improvement was the 'stock of finished goods' index, which gained +0.9 point to 48.2.

Activity Growth in Small- and Medium- Sized Firms Also Moderated

Separately, the Caixin/ Markit manufacturing PMI fell -0.9 point to 50.3, the lowest point since September, in April. The market had anticipated a modest rise to 51.4. As the accompanying statement suggested, "the sub-indexes of output and new business both fell to the weakest levels since September, while the employment index dropped to the lowest in three months". It added that "the downward pressure on manufacturing gradually emerged in April, with all indicators weakening. The Chinese economy may be starting to embrace a downward trend in the near term as prices of industrial products decline and active restocking comes to an end".

Both reports indicated that activity growth in China has peaked in March. Weakness in trade expansion and the government's tightening in the monetary were likely the causes. Inflationary pressure in the manufacturing sector also eased in April, from the peak in the first quarter of the year. We would get more insight after the trade balance report is released on May 8.

PBOC Trimmed Liquidity Injection in April

In a separate note, PBOC injected RMB590.3B to the market in April, down -18% from the previous month. Of which, RMB495.5B was from the medium-term lending facility (MLF) while the rest from standing lending facility (SLF). Looking into the composition of MLF, RMB 128B was 6-month loan and RMB367.5B was 1-year loan. Outstanding SLF loans were at RMB10.27B at the end of April, down from RMB70B at end-March. This represents a net drain of RMB59.7B. The central bank also injected RMB 83.9B of pledged supplementary lending (PSL) facility to a number of commercial, sending the total of PSL to about RMB2.3 trillion at the end of April, up from RMB2.22 trillion the same period last month. PBOC has been reliant on open market operation, rather than adjustments of interest rate and required reserve ratio, to achieve its monetary policy stance. The overall trend of liquidity injection remains in line with the government's 'prudent and neutral' policy, which aims at cooling the excessive credit growth but not harming economic stability.

With May Day over, capital markets are back in full swing and despite some weaker than expected economic data in the U.S of late, investors are returning to risky assets.

Global stocks are heading for a fresh high as investors focus on stronger corporate earnings. The yen has extended it losses while Treasury prices maintain its price declines.

Dealers will be focusing on the Fed and the U.S yield curve with the FOMC beginning its two-day policy meet today.

Yesterday, the VIX closed at its lowest level in a decade, which suggests that investor fears are easing, despite North Korea's saber rattling.

1. Global equities trade atop record highs

In Asian overnight, shares rose to near two-year highs as growing optimism over tech industry earnings and easing concerns over North Korea offset softer-than-expected factory readings in China and the U.S.

In Japan, the Nikkei climbed (+0.7%) to a six-week high on earnings optimism, while the broader Topix index rose +0.6% to the highest since March 21.

Note: Japanese markets will be closed for holidays over the next three-days.

In South Korea, the Kospi index advanced +0.7% to trade atop of its six-year high. In Singapore, the Straits Times Index added +0.9%, while in China the Shanghai Composite Index declined -0.4%, following four straight days of gains.

Down-under, the Aussie S&P/ASX 200 Index slipped -0.1%, breaking a seven-day rally, as banks declined.

In Europe, indices are trading higher on generally positive PMI data out of Eurozone. Elsewhere, stronger earning from BP is helping the FTSE to slightly outperform.

U.S stocks are to open little changed (-0.1%).

Indices: Stoxx50 0.1% at 3564, FTSE +0.4% at 7232, DAX 0.1% at 12447, CAC-40 0.3% at 5280, IBEX-35 0.6% at 10776, FTSE MIB 0.5% at 20710, SMI 0.4% at 8852, S&P 500 Futures -0.1%

2. Oil prices rise, gold falls

Crude ‘bulls' are getting the better of the “bears” rising production concerns in the U.S, Canada and Libya as oil prices are on the rise ahead of the U.S open, supported by market expectations that OPEC will extend last November's output cut quotas into H2. OPEC is to meet on May 25.

Brent crude oil futures are up +30c at +$51.82 a barrel – the contract hit a one-month low of +$50.45 last week after the restart of two Libyan oilfields – while U.S light crude (WTI) is up +20c at +$49.04 a barrel.

Note: Libya's National Oil Company said yesterday that production had risen above the +760k bpd to its highest in three-years, with plans to keep boosting production. Offsetting some of the market prices losses is data from Russia showing that oil output fell slightly to +11m bpd in April from +11.05m in March.

Gold trades near its three-week lows on surging equities and on the dollar's strength. Bullion prices dropped -1% yesterday to +$1,253.66 an ounce, its weakest since April 11.

3. Global yields back up

A number of factors are boosting demand for U.S treasuries on price pullbacks -investors are sceptical over Trump's capability to push through his fiscal agenda anytime soon and a number of economic releases over the past month have been disappointing.

U.S 10's have backed up +1 bps to +2.33% overnight on market belief that the Treasury department may raise the size of its longer-dated bond issuance from its quarterly refunding release tomorrow – 10-year note and 30-year bonds to increase by perhaps +$2B apiece.

The Fed is to start its two-day policy meeting today, and is widely expected to hold short-term interest rates steady tomorrow after a rate increase in March. Some Fed officials have signalled in recent weeks that the door remains open for the Fed to raise rates again in June. Fed fund futures see a +66% chance for a hike next month.

4. Dollar majors trade in narrow range

The dollar majors are trading in a narrow range. The EUR (€1.0910) continues to find support on pullback outright, helped by expectations that Macron will beat far-right candidate Marine Le Pen in this weekend's French presidential elections. Euro GDP data out tomorrow is expected to show the economy picking up.

Sterling falls, with GBP down -0.1% at £1.2877 as U.S Congress reached a deal to avoid a government shutdown helps the dollar. It's off its overnight lows after the U.K manufacturing PMI data beat consensus – 57.3 in April, bouncing from March's four-month low of 54.2.

USD/JPY (¥112.21) is now trading atop its one-month highs, with yen ‘bears' looking for further extensions for the dollar.

Note: The yen remains vulnerable to rising political tensions over North Korea as it is as safe-haven.

The AUD/USD (A$0.7531) was most volatile overnight, sliding after a disappointing China Caixin Manufacturing PMI (see below), before lifting to its overnight highs after an upbeat RBA policy statement.

Emerging markets FX gains are being supported by optimism that the Fed will ‘not' raise interest rates this week, and that there wont not be any negative surprises from this weekends second round French Presidential election.

5. RBA holds steady, China data disappoints

Overnight, RBA held rates steady at +1.50% as expected, but the policy statement was definitely more upbeat after last month's grim assessment of employment.

Aussie policy makers noted improvement in global growth boosting demand for exports, noted employment was now a bit stronger and forecasted growth reaching +3% over the next few years. As to be expected, they are also anticipating further increase to underlying inflation.

In China, the Caixin Manufacturing PMI came in below estimates at 50.3 vs. 51.3E, which is also its seven-month low.

Analysts noted that slower increases in output and new orders endorsed the decline, along with softer growth in new-orders that forced companies to cut jobs at the fastest pace in four-months. Slowing growth was also felt in the prices components.

The pair is holding softer tone on Tuesday, following uninterrupted rally that lasted for seven straight days and peaked at 1.3695 (fourteen–month high).

Fresh boost has been received on break above former tops at 1.3586/96 (14 Nov / 28 Dec 2016 peaks) which also mark the top of thick weekly cloud and now act as supports.

Initial signs of correction are seen on overbought daily RSI / slow stochastic which would generate stronger bearish signal on reversal.

First support at 1.3634 (Monday's low) is still holding with break lower and daily close in red, expected to signal further easing.

Weekly cloud top and former peaks, together with Fibo 38.2% of 1.3409/1.3695 upleg, mark a cluster of strong supports loss of which would signal deeper correction and expose rising daily Tenkan-sen at 1.3552.

With no releases from Canada scheduled, focus will turn towards tomorrow's comments from Fed after policy meeting ends, which are expected to stronger influence performance of the US dollar.

Res: 1.3681, 1.3694, 1.3726, 1.3845
Sup: 1.3634, 1.3585, 1.3552, 1.3518

Notes/Observations

European Manufacturing PMI data remains in expansion territory (beats: UK, Italy, Spain, Sweden, Czech, Poland; misses: Swiss, Russia, Hungary; in-line: France, Germany, Euro Zone)

Greece moves closer to concluding its 2nd bailout review

Risk appetite building momentum aided by declining global headwinds and prospects of an increasing pace of reform in the US; no surprises seen by Fed or in 2nd round of French elections

Wed's FOMC meeting likely to guide markets towards a June rate hike

Overnight:

Asia:

Reserve Bank of Australia (RBA) left its Cash Rate Target unchanged at 1.50% (as expected)

China Apr Caixin Manufacturing PMI registers its 10th straight month of expansion but hits a 7-month low (50.3 v 51.3e)

Japan Fin Min Aso: North Korea is the most urgent matter for Japan; China has capability and capacity to fix situation; Want to eliminate nuclear capability. JPY currency (yen) is vulnerable to rising political tensions over North Korea as it is a safe-haven currency

South Korea Apr CPI data saw annual its pace move back below target for 1st time in 2017 (Y/Y: 1.9% v 2.1%e)

Europe:

Greece Finance Ministry: Negotiators of Greece govt and its creditors said to have concluded an agreement on bailout mandated reforms in Athens. Greece needs to legislate measures before Eurogroup meeting scheduled for May 22nd before any disbursement of loans

Americas:

Treasury Sec Mnuchin: Could take two years to get GDP growth up to 3%; will be achievable and sustainable because of tax and regulatory reform and trade renegotiations. Q1 GDP was weak due to seasonality issues and because the economy is being held back. Will release details of the tax plan as soon as we can, but still working on it with Congress

Economic Data

(IE) Ireland Apr Manufacturing PMI: 55.0 v 53.6 prior (47 straight month of expansion)

(IN) India Apr PMI Manufacturing: 52.5 v 52.5 prior (4th month of expansion)

(RU) Russia Apr Manufacturing PMI: 50.8 v 52.6e (9th month of expansion)

(SE) Sweden Apr PMI Manufacturing: 62.5 v 62.3e

(NO) Norway Apr Manufacturing PMI: 54.7 v 54.3e

(HU) Hungary Apr Manufacturing PMI: 55.9 v 56.5e (16th month of expansion)

(PL) Poland Apr Manufacturing PMI: 54.1 v 53.9e (29th month of expansion)

(TR) Turkey Apr PMI Manufacturing: 51.7 v 52.2e

(ES) Spain Apr Manufacturing PMI: 54.5 v 54.4e

(CH) Swiss Apr PMI Manufacturing: 57.4 v 58.2e

(CZ) Czech Apr PMI Manufacturing: 57.5 v 57.0e (9th month of expansion)

(IT) Italy Apr Manufacturing PMI: 56.2 v 56.0e (8th month of expansion and the highest since Mar 2011)

(FR) France Apr Final Manufacturing PMI: 55.1 v 55.1e (confirmed 7th month of expansion and highest since Apr 2011)

(DE) Germany Apr Final Manufacturing PMI: 58.2 v 58.2e (confirmed its 29th month of expansion

(EU) Euro Zone Apr Final Manufacturing PMI: 56.8e v 56.8 prelim (confirmed 45th straight month of growth and highest since April 2011)

(GR) Greece Apr Manufacturing PMI: 48.2 v 46.7 prior (8th month of contraction)

(IT) Italy Mar Preliminary Unemployment Rate: 11.7% v 11.5%e

(CH) SNB Total Sight Deposits for Week Ended Apr 28th (CHF): 571.4B v 569.1B prior

(UK) Apr PMI Manufacturing: 57.3 v 54.0e (9th month of expansion and highest since Apr 2014)

(EU) Euro Zone Mar Unemployment Rate: 9.5% v 9.4%e (matches lowest level since 2009)

(BE) Belgium Mar Unemployment Rate: 6.9% v 7.0% prior

(ZA) South Africa Apr Manufacturing PMI: 44.7 v 51.4e (1st contraction in 4 months)

Fixed Income Issuance:

(ID) Indonesia sold total IDR4.075T vs. IDR6.0T target in 2-year,4-year,7-year and 15-year Project-based Sukuks (PBS)

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 0.1% at 3564, FTSE +0.4% at 7232, DAX 0.1% at 12447, CAC-40 0.3% at 5280, IBEX-35 0.6% at 10776, FTSE MIB 0.5% at 20710, SMI 0.4% at 8852, S&P 500 Futures -0.1%] Market Focal Points/Key Themes

European indices trade up after the majority of indices come back from the long weekend, continuing the upward momentum that has been seen this year. Generally positive PMI data out of Europe is helping underpin the move with strong earnings from BP helping the FTSE slightly outperform.

Earnings during the day continue with notable earners out of the US to include Merck, Pfizer and MasterCard and after the close Tech giant Apple is due to report.

Equities

Consumer discretionary [Just Eat [JE.UK] -4.2% (Q1 orders), Ocado [OCDO.UK] +7.2% (potential tie up with Marks and Spencer), Dufry [DUFN.CH] -3.0% (Earnings), Accel Grp [ACCEL.NL] -5% (Discontinues talks with Pon Holdings)]

Consumer Staples [PureCircle [PURE.UK] -10% (Cuts outlook)]

Materials: [DSM [DSM.NL] +1.1% (Earnings)]

Industrials: [Geberit [GEBN.CH] -1.3% (Earnings), DSV [DSV.DK] +3% (Earnings)]

Financials: [Aberdeen Asset Mgt [ADN.UK] +3.8% (Earnings),

Healthcare: [Abivax [ABVX.FR] +85% (ABX464 demonstrated the first reduction in HIV reservoirs)]

Energy: [BP [BP.UK] +1.5% (Earnings)]

Speakers

ECB's Nowotny (Austria) stated that the : General Council to hold a discussion at the Jun policy meeting about its strategy for 2018 and an eventual exit from its ultra-easy policy.

EU Institutions: Agreement with Greece with creditors sets the basis for conclusion of the 2nd bailout review

European Stability Mechanism (ESM) Statement: Staff teams from the EU Commission, ESM, ECB and the IMF have reached a preliminary agreement with the Greek authorities on a policy package to support the recovery in Greece

German Finance Ministry: Greek agreement is an important interim step; more clarity still needed on Greek primary budget surplus

Eurogroup chief Dijsselbloem: Welcomes preliminary agreement on Greece package

Greece New Democracy Party (opposition): Will not support new bailout agreement with creditors

French presidential candidate Macron: Will not change his campaign promises to win the backing of Melenchon

Bank of Korea (BOK) Apr minutes: One member sees upside risks for growth projections; economic recovery could be temporary One member: Consumption unlikely to fall more than expected (**Note: Only dissenters are identified in minutes)

China govt reiterated its call for dialogue and consultation to resolve the North Korea issue

China said to be prepared to reach Code of Conduct in the South China Sea at an early date

Currencies

Dealers noted that EUR/USD was likely to stay within a tight range ahead of the French 2nd round of its Presidential election next weekend. The pair stayed above the 1.09 during the session with 1.10 seen as formable resistance for the time being.

USD/JPY was at 1-month high above the 112 handle. Dealers attributed Treasury Sec Mnuchin hint of using the very long end of the US yield curve for funding as rationale for the greenback's strength as it added to the steepening of US yield curve

GBP received a small boost after UK Apr PMI Manufacturing registered its 9th month of expansion and highest level since Apr 2014)

Emerging markets FX saw gains buoyed by optimism the Fed will not raise interest rates this week and there won't be any negative surprises from the 2nd round of the French Presidential election

Fixed Income

Bund futures trade at 161.65 down 17 ticks falling slightly lower following Monday's slide in Treasuries on heavy corporate supply and Treasury Sec Mnuchin comments on ultra-long bond issuance. A break of 161.54 support level could see lows target 161.26 followed by 160.15. Resistance moves to 161.88 level followed by 163.54.

Gilt futures trade at 127.95 down 30 ticks falling after UK Manufacturing PMI beat expectations and rose to the highest since Apr 2014. The move lower was also supported by the decline in US treasuries and German Bunds. Continuation to the downward trend eyes 127.74 followed by 125.83. Resistance stands at 128.58 then 128.81 followed by 129.14.

Tuesday's liquidity report showed Friday's excess liquidity rose to €1.588T a gain of €1B from €1.587T prior. Use of the marginal lending facility climbed to €361M from €259M prior.

Corporate issuance saw over $4.35B come to market via 2 issues headlined by United Technologies $4.0B 5-part senior unsecured notes and Kimberly Clark $350M 30 year senior notes.

Looking Ahead

(RO) Romania Apr International Reserves: No est v $38.6B prior

(RU) Russia Apr Sovereign Wealth Fund Balances: Reserve Fund: No est v $16.2B prior; Wellbeing Fund: No est v $73.3B prior

(IT) Italy Apr Budget Balance: No est v -€22.9B prior

(NG) Nigeria Apr Manufacturing PMI:

(ZA) South Africa Apr Naamsa Vehicle Sales Y/Y: 1.5%e v 2.1% prior

05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (prior €14.4B with 43 bids recd)

05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

05:30 (BE) Belgium Debt Agency (BDA) to sell €1.3-1.7B in 3-month and 6-month bills

05:30 (NL) Netherlands Debt Agency (DSTA) to sell 6-Month Bills

06:45 (US) Daily Libor Fixing

07:25 (BR) Brazil Central Bank Weekly Economists Survey

07:30 (CL) Chile Central Bank (BCCh) Apr Minutes

07:45 (US) Weekly Goldman Economist Chain Store Sales

08:00 (CZ) Czech Apr Budget Balance (CZK): No est v 4.7B prior

08:00 (BR) Brazil Apr PMI Manufacturing: No est v 49.6 prior

08:15 (UK) Baltic Dry Bulk Index

08:50 (FR) France Debt Agency (AFT) to sell combined €5.-6.2B in 3-month, 6-month and 12-month BTF Bills

08:55 (US) Weekly Redbook Sales

09:00 (EU) Weekly ECB Forex Reserves

09:00 (NZ) Fonterra Global Dairy Trade Auction

09:00 (SG) Singapore Apr Purchasing Managers Index: 51.2e v 51.2 prior, Electronics Sector Index: No est v 51.8 prior

09:00 (RU) Russia announces upcoming weekly OFZ bond auction

09:30 (EU) ECB announces Covered-Bond Purchases

10:00 (DK) Denmark Apr Foreign Reserves (DKK): 464.1Be v 464.1B prior

10:00 (BR) Brazil Mar CNI Capacity Utilization: 77.2%e v 77.3% prior

10:00 (MX) Mexico Central Bank Economist Survey

10:00 (MX) Mexico Mar Total Remittances: $2.3Be v $2.1B prior

10:30 (MX) Mexico Apr PMI Manufacturing: No est v 51.5 prior

11:00 (BR) Brazil to sell I/L 2022, 2026, 2035 and 2055 Bonds

11:30 (US) Treasury to sell 4-Week Bills

12:00 (IT) Italy Apr New Car Registrations Y/Y: No est v 18.2% prior

13:00 (MX) Mexico Apr IMEF Manufacturing Index: 46.5e v 45.9 prior; Non-Manufacturing Index: 48.2e v 48.0 prior

13:00 (NZ) New Zealand Apr QV House Prices Y/Y: No est v 12.9% prior

14:00 (BR) Brazil Apr Trade Balance: $7.0Be v $7.1B prior; Total Exports: $18.1Be v $20.1B prior; Total Imports: $10.9Be v $12.9B prior

16:30 (US) Weekly API Oil Inventories