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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.

Fed's Beige Book: Modest to moderate expansion in all districts

Released yesterday, Fed's latest Beige Book indicated that economic activity increased in each of the twelve Federal Reserve Districts between mid-February and the end of March. The the pace of expansion was "equally split between modest and moderate". On the labor market situation, the report noted that it "remained tight, and employers in most Districts had more difficulty filling low-skilled positions, although labor demand was stronger for higher skilled workers". It added that "modest wage increases broadened" with "bigger increases for workers with skills that are in short supply". A larger number of firms noted "higher turnover rates and more difficulty retaining workers". Yet, the wage pressure remained modest and has not yet significantly passed to selling prices. As the report suggested, "input prices generally increased at a modest rate and outpaced gains in selling prices, which rose only slightly".

UK PM May got parliament backing for snap election

UK Prime Minster Theresa May won backing from the parliament for the snap election on June 8. The bill was passed with overwhelming 522 to 13 votes. The Parliament will now formally be dissolved on May 3. May said that she won't be doing TV debates as she believes in "campaigns where politicians actually go out and about and meet with voters. And she wants the election to focus on Brexit and gives her "the strongest possible hand" for negotiation with EU. She also noted that the election is "a choice between strong and stable leadership under the Conservatives or weak and unstable coalition of chaos led by Jeremy Corbyn."

ECB officials sound cautious on stimulus exit

ECB governing council member Benoit Coeure said yesterday that policy makers are "very, very serious about the forward guidance". Coeure referred to the communicates that ECB will keep buying assets "until December or later if necessary, that rates will remain low". Coeure sees no reason to change the sequence. Another governing council member Francois Villeroy de Galhau said that the "current monetary policy stance remains fully appropriate based on current information." ECB chief economist Peter Praet said that "risks are still tilted to the downside" in the medium term. Released from Eurozone, German PPI rose 0.0%, 3.1% yoy in March.

Australia business confidence unchanged

Australia NAB quarterly business confidence was unchanged at 6 in Q1. NAB chief economist Alan Oster noted that employment expectations hit multi-year highs in short and medium term. And the set of data "points to a tighter labour market than the ABS unemployment rate is currently suggesting." Also, capex plans reached highest level since 2011. Thus, with lack of inflation pressure, RBA would stand pat for an "extended period".

New Zealand CPI jumped

New Zealand CPI rose 1.0% qoq in Q1, up from prior quarter's 0.4% qoq, and beat expectation of 0.8% qoq. Kiwi jumped briefly on talk that RBNZ is falling behind the curve. And the central bank could be forced to raise interest rates. Overnight index swaps are pricing in 80% chance of a rate hike within the coming 12 months.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0694; (P) 1.0715 (R1) 1.0732; More....

EUR/USD's rise from 1.0569 continues today and reaches as high as 1.0777 so far. Intraday bias remains on the upside for 1.0905 resistance and above. Nonetheless, choppy rise from 1.0339 is still seen as a correction. Hence, we'll pay attention to topping signal above 1.0905 again, as we'd expect larger down trend to resume later. On the downside, break of 1.0676 minor support will turn intraday bias back to the downside for 1.0569 instead.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate term reversal. this would also be supported by sustained trading above 55 week EMA.

Economic Indicators Update

The Euro was elevated to levels not seen since March 2017 at 1.0777 during Thursday's trading session, as participants discarded short positions ahead of the first round of the French Presidential elections this weekend. Although the Euro has continued to display resilience against pre-election jitters, investors should be under no illusion that this has to do with a change of sentiment. With political uncertainty still a recurrent theme in Europe, the incredible rebound that the Euro has staged may be utilized by longer-term bears to send prices lower.

The latest opinion poll figures that indicate a fierce competition will be taking place between the four candidates in this first round have simply added to anxieties, as speculators ponder over which of them will be seizing the title of President. Although Centrist Emmanuel Macron has been labeled as the favorite to become the next French President, it must be kept in mind that millions of French voters remain undecided, fueling concerns of a potential election shocker. The threat of Marine Le Pen winning the election remains live, and the risks associated with such a victory may ensure further downside pressures on the Euro.

From a technical standpoint, the EURUSD is challenging the 1.0750 level on the daily charts. A solid daily close above this level could open a path towards the next level of interest at 1.0820. If bulls fail to maintain control above 1.0750, then the Euro could edge back down towards 1.0685.

Dollar remains on the back foot

A flurry of disappointing U.S economic data and rising concerns over Trump's ability to push through with the phenomenal tax cuts he promised during his election campaign has left the Greenback vulnerable to steep losses. With the Trump rally displaying signs of exhaustion, speculations over the Federal Reserve raising U.S interest rates in June has taken a hit, with probability falling to 46.6%. Investors remain on edge over the heated tensions between the U.S and North Korea, which may have complimented to the downside. From a technical standpoint, the Dollar Index remains pressured on the daily charts, with a break below 99.50 opening a path towards 99.00.

Thursday April 20: Five things the markets are talking about

Current price action suggests that investors continue to pare back 'risk-on' market positions ahead of this weekend's first round of the French Presidential election.

Geopolitical worry over North Korea, a faltering U.S economy and a snap U.K election are also consuming investor's mindsets.

A race too close to call - every French poll for the past month has shown the independent Macron and the National Front's Le Pen taking the top two-spots. Macron is then expected to easily win the May 7 runoff by a +25% margin.

However, both front-runners have been steadily slipping over the past fortnight, and Republican Francois Fillon and Communist-backed Jean-Luc Melenchon are now within striking distance.

Nevertheless, Millions of French voters remain undecided, making this the least predictable vote in France in decades.

1. Stocks stick to tight ranges

Global stocks eked out small gains overnight as investors resisted risky bets ahead of the first round of the French presidential election.

In Japan, the broader Topix index added +0.1%, bringing its weekly gain to +0.9%, while the Nikkei 225 share average ended -0.01% lower.

In Hong Kong, the Hang Seng advanced +0.7%, while down-under the Aussie S&P/ASX 200 Index climbed +0.3%, while South Korea's Kospi index was up +0.5%.

In China, the Shanghai Composite was little changed, after four days of losses brought it to the lowest level since early February.

In Europe, equity indices are trading generally higher as market participants continue to focus on the upcoming French presidential elections. Banking stocks are supporting the Eurostoxx, while energy, commodity and mining stocks are trading lower on the FTSE 100.

U.S stocks are set to open in the black (+0.3%).

Indices: Stoxx50 +0.5% at 3,440, FTSE -0.1% at 7,105, DAX +0.2% at 12,034, CAC-40 +0.9% at 5,048, IBEX-35 +0.9% at 10,461, FTSE MIB +0.4% at 19,907, SMI +0.4% at 8,564, S&P 500 Futures +0.3%

2. Oil prices claw back losses, but oversupply still weighs, gold higher

Oil prices have regained some ground overnight after yesterday's steep losses, as Kuwait said it expected an OPEC-led effort to cut supplies would be extended into H2.

Brent crude futures are at +$53.34 per barrel, up +41c, or +0.77% from last nights close. U.S. West Texas Intermediate (WTI) crude futures are up +32c, or +0.63%, to +$50.76 a barrel.

Also supporting prices was yesterday's data from the EIA, which showed a reduction in commercial U.S crude stocks, which fell by -1m barrels last week to +532.34m barrels.

Note: Crude prices fell -3.5% Wednesday after the EIA reported surging gasoline inventories as well as another rise in U.S crude oil production to +9.25m bpd, up almost +10% in 12-months.

Compliance between OPEC and Non-OPEC members on agreed upon production cuts was over +90% in March.

Gold prices are holding firm (unchanged at +$1,278.74 per ounce) ahead of the U.S open after falling as much as -1% yesterday, with tensions surrounding North Korea and the upcoming French presidential election driving safe-haven demand.

Yesterday, the yellow metals drop was its worst one-day fall in four-weeks.

3. Global yield curves remain flatter

The U.S 10-year Treasury yield has tumbled about -40 bps from its 2017 peak in March. Despite the plunge in yields, bond bears still expect U.S yields to back up towards that +3% handle by Q4. They don't believe that the current patch of 'softer' U.S data is weak enough to throw the Fed off its game plan to normalize rates.

However, one risk for that higher yield call is for both far right and far left candidates in the French Presidential election to enter into the second round.

If the market gets its baseline scenario - Le Pen vs. Macron - in the second round on May 7, Le Pen is unlikely to significantly increase her support beyond her base, and voters of the moderate left and right are expected to merge around Macron. This scenario should be a plus for the EUR (€1.1000'ish) and have Bund yields unwinding the past months risk premium rather quickly.

The yield on U.S 10's has slid -1 bps to +2.20% after a +5 bps advance Wednesday. Most other eurozone bond yields are little changed on the day.

4.'Big' dollar remains under pressure

The USD remains soft against the G10 FX pairs that started with last Friday's soft retail sales and CPI data from the U.S.

The EUR has rallied +0.5% to a three-week high atop of €1.0777, shrugging off political uncertainty before this weekend's first-round French presidential elections. Election risk seems to be more evident in Scandinavian and central European currencies. The EUR is also being supported by the markets doubts about the global reflation trade.

GBP (£1.2836) remains supported by the view that early elections in the U.K diminishes prospects of a messy exit from the E.U - however, someone needs to tell that to the European side!

Elsewhere, the NZD (NZ$0.7036) is firmer after data overnight showed that New Zealand Q1 CPI annual reading remained within the target range for the second consecutive month and the highest level since Q3 2011.

5. German March PPI unchanged on month, +3.1% on year

Data this morning showed that German producer prices remained unchanged last month, while the annual rate stabilized at February's level.

As expected, factory gate prices rose +3.1% in March y/y., while the annual rate matched the strongest annual rise in over five-years.

Note: Following the pattern of previous months, energy prices (+4.5% y/y) continue to have the biggest impact on the overall index.

Ex-energy prices, producer prices rose +0.3% on the month and increased by +2.6% on the year.

• UK election to go ahead on June 8th
• Sterling reacts positively as polls put Conservatives ahead
• US Unemployment Claims later this afternoon

Yesterday was once again dominated by the political scene, with the Election Bill surpassing the two thirds needed in the commons by a considerable margin of 522 - 13 votes. This officially means the election will go ahead on June 8th and campaigning can start. The bookmakers are seeing it as a Conservative landslide with labour in such disarray under Jeremy Corbyn, despite him putting on a brave face. Sterling has reacted positively as polls put the Conservatives ahead, as a potential landslide win is perceived to help the UK's Brexit negotiation stance, mainly because Prime Minister, Theresa May, will be able to control the more Eurosceptic fringe of the Conservative party. The odds of a "softer" Brexit and an easier path through the Commons have increased. The Pound did strengthen throughout the day, although came off the highs before the close.

Last night, we also had the release of the Beige Book in the United States, which is monitored closely, as it summarises current economic conditions and is only released eight times a year. The key points were that the economy grew at a modest to moderate pace and wages are looking more positive, which is being viewed as an optimistic sign for another Federal Reserve rate hike this year.

Looking to today, as the political landscape unfolds, the main news will be Bank of England Governor, Mark Carney, speaking in Washington at around 10:30 GMT. Carney will be speaking at the Institute of International Finance event and this will be watched closely for any monetary and political speak, especially with what has gone on over the last few days. We also get US Unemployment Claims data at 13:30 GMT, which will be closely watched by the market.

Badly explained film plots

The Shining: A family's first Airbnb experience goes very wrong

The Chronicles of Narnia: Kid comes out of the closet

The Lord of the Rings: Group spends nine hours returning jewellery

The DAX has posted gains in the Thursday session, climbing above the symbolic 12,000 level. Currently, the DAX is trading at 12,015.50. On the release front, there are no major events in the eurozone. German PPI dipped to 0.0%, short of the estimate of 0.2%. On Friday, Germany and the Eurozone release services and manufacturing PMIs, which are expected to indicate expansion.

Market focus is fixed on the French presidential election, with the first round of voting slated for April 23. This election is one of the tightest in decades, with the four front-runners clustered within a few percentage points. Given the closeness and unpredictability of the election, it's no surprise that final opinion polls before the vote are moving markets. A Harris Interactive opinion poll published on Thursday showed centrist Emmanuel Macron gaining ground, with 25% of the vote. Far-right candidate Marine Le Pen follows with 22%. Next are Republican candidate Francois Fillon and left-wing candidate Jean-Luc Melenchon, both tied at 19%. Le Pen and Melenchon want to hold a referendum on French membership in the EU, so the markets are clearly more comfortable with Macron and Fillion, and this latest poll has boosted the stock markets. We can expect more volatility as we near Election Day, and French banks will be staffed throughout Sunday night in order to respond quickly to developments in the currency markets after the election results.

Eurozone consumer inflation softened in March, but matched the forecast. Final CPI slipped to 1.5%, compared to 2.0% a month earlier. The indicator has been steadily rising, and climbed to 2.0% in February, which is the ECB's inflation target. This had led to speculation that the ECB might have to consider tightening its monetary policy, either by lowering interest rates or tapering its asset-purchase program (QE). The ECB's asset-purchase program is scheduled to remain in place until December, although the central bank could opt to bring up that date or taper QE if growth and inflation numbers in the Eurozone are unexpectedly strong. There are also political considerations at play, as the ECB is reluctant to make any significant monetary moves with upcoming elections in France and Germany.

Eurozone consumer inflation has been gaining strength in recent months, but softened in March. Final CPI slipped to 1.5%, compared to 2.0% a month earlier. The index climbed to 2.0% in February, which is the ECB's inflation target. This had led to speculation that the ECB might have to consider tightening its monetary policy, either by lowering interest rates or tapering its asset-purchase program (QE). The ECB's asset-purchase program is scheduled to remain in place until December, although the central bank could opt to bring up that date or taper the program if growth and inflation numbers in the Eurozone are unexpectedly strong. There are also political considerations at play, as the ECB is reluctant to make any significant monetary moves with upcoming elections in France and Germany.

The Federal Reserve has sent out broad hints that it plans to raise rates gradually in 2017, but the timing and number of moves in store remains uncertain. The Fed has broadly hinted that it plans two more rate hikes this year, but there have been calls from some Fed policymakers for three more hikes. However, soft retail sales and CPI numbers in March are likely to make the Fed more dovish, and on Tuesday, the Atlanta and New York Federal Reserve lowered their outlook for US economic growth for the first quarter. The Fed can point to a labor market that is close to capacity as well as strong consumer confidence, but surprisingly, this has not translated into stronger consumer spending, a key driver of economic growth. The odds of a June hike have slipped to 46% according to the CME Group, down sharply from 65% in early April.

The USD/CAD has formed a bullish marubozu (strong momentum candle) on daily timeframe (see the mini daily chart) which marks an uptrend. Retracement towards POC might start at the break of trendline (red). If the price gets to POC (38.2, ATR low, D L4, EMA89) the POC zone should spike the price further up towards D H3 at 1.3513 and D H4/ATR High at 1.3540. Only above 1.3545 we could see 1.3600.

D L3 - Daily Camarilla Pivot (Daily Interim Support)

D H3 - Daily Camarilla Pivot (Daily Interim Resistance)

D H4 - Daily Camarilla Pivot (Strong Daily Resistance)

D L4 - Daily Camarilla Pivot (Very Strong Daily Support)

D L5 - Daily Camarilla Pivot (Strongest Daily Support)

W H5 - Weekly H4 Camarilla (Strongest Weekly Resistance)

POC - Point Of Confluence (The zone where we expect price to react aka entry zone)

US oil holding within narrow daily cloud (spanned between ($50.74 and $51.15) following bounce from Wednesday’s spike low at $ 50.06.

Strong bearish acceleration on Wednesday extended pullback from $50.74 (12 Apr recovery high) and probed below important support at $50.41 (daily Kijun-sen line) and approached psychological $50.00 level. Fall was accelerated by lower than expected draw in oil inventories which showed 1 million barrels draw in the week ending 12 Apr, compared to 1.5 million barrels draw forecast.

In addition, increased production of US shale oil continues to undermine attempts of OPEC to stabilize and boost oil prices by reducing production.

Wednesday’s long bearish daily candle weighs on markets, as oil price was firmly in red for past three days, with weakening daily studies supporting negative scenario.

Corrective bounce is seen limited and should ideally remain under broken 55SMA at $51.55, with extended upticks to be capped by broken 100SMA / daily Tenkan-sen at $51.85/90, ahead of fresh leg lower.

Key supports at $50.00 and $49.62 (Fibo 61.8% of $47.07/$53.74 rally) remain in near-term focus, with sustain break lower to confirm an end of recovery phase from $47.07 and expose next strong support at $48.96 (200SMA).

Res: 51.32, 51.55, 51.90, 52.34
Sup: 50.87, 50.00, 49.62, 48.96

Notes/Observations

OPEC officials signal that production cuts likely to be extended

Political developments have come back into focus (reduced political uncertainty in the UK vs still significant uncertainties in the Eurozone

GBP supported by the view that early elections in the UK diminished prospects of a messy exit from the European Union

Oil ministers posturing for an extension of OPEC/Non-Opec oil cuts

Overnight:

Asia:

Japan Fin Min Aso: Must eventually raise sales tax, cut healthcare and pension payments to pursue steps to raise inflation to slash Japan's huge public deficit

China State Administration of Foreign Exchange (SAFE) spokesperson reiterated view that pressure on capital outflows eased significantly in Q1. Forex supply and demand were balanced in Q1. Expectations on yuan currency depreciation have weakened significantly so far this year

New Zealand Q1 CPI annual reading remained within the target range for the 2nd straight month and highest level since Q3 2011 (YoY: 2.2% v 2.0%e)

Europe:

ECB’s Villeroy (France): Current ECB policy stance remains fully appropriate; current macro environment doesn't call for a re-calibration

Harris poll on upcoming France Presidential election: Le Pen would lose to either Macron, Fillion and Melenchon in 2nd round

Recent Polls on upcoming snap elections in UK puts Conservative well ahead of Liberals (44-48% vs. 24-26% range)

Americas:

Fed Vice Chairman Fischer: Gradual rate hikes will mitigate spillover risks abroad

Fed's Rosengren (moderate, non-voter): Fed could start shrinking balance sheet "relatively soon"’

FED Beige Book: Economic activity increased in all 12 districts at a modest pace

Economic Data

(NL) Netherlands Mar Unemployment Rate: 5.1% v 5.3% prior

(NL) Netherlands Apr Consumer Confidence: 26 v 24 prior

(JP) Japan Mar Nationwide Dept Sales Y/Y: -0.9% v -1.7% prior; Tokyo Dept Store Sales Y/Y: -0.2% v -3.1% prior

(DE) Germany Mar PPI M/M: 0.0% v 0.2%e; Y/Y: 3.1% v 3.2%e

(JP) Japan Mar Convenience Store Sales Y/Y: 0.0% v -1.7% prior

(DK) Denmark Apr Consumer Confidence: 7.4 v 6.2 prior

(TR) Turkey Apr Consumer Confidence: 71.3 v 65.0e

(CZ) Czech Mar PPI Industrial M/M: -0.1% v 0.0%e; Y/Y: 3.0% v 3.1%e

(TW) Taiwan Mar Export Orders Y/Y: 12.3% v 8.8%e

(EU) Euro Zone Feb Construction Output M/M: +6.9% v -2.4% prior; Y/Y: +7.1% v -5.1% prior

Fixed Income Issuance:

(ES) Spain Debt Agency (Tesoro) sold total €4.9&B vs. €4.5-5.5B indicated range in 2022, 2027, 2029 and 2046 bonds

Sold €1.63B in 0.4% Apr 2022 Oblig; Avg yield: 0.439% v 0.548% prior; Bid-to-cover: 1.58x v 1.45x prior

Sold €1.42B in 1.5% Apr 2027 SPGB; Avg yield: 1.683% v 1.610% prior; Bid-to-cover: 1.55x v 1.65x prior

Sold €991M in 6% Jan 2029 SPGB; Avg Yield: 1.880% v 1.249% prior, bid-to-cover: 1.67x v 1.36x prior

Sold €937M in 2.90% Oct 2046 SPGB; Avg Yield 2.957% v 3.044% prior; Bid-to-cover: 1.70x v 1.56x prior

(FR)France Debt Agency(AFT) sold total €5.449B vs. €4.5-5.5B indicated range in 2020 and 2022 Oats

Sold €3.425B in 0.00% Feb 2020 Oat; Avg Yield: -0.32% v -0.29% prior; Bid-to-cover: 1.67x v 1.68x prior

Sold €2.074B in 0.00% May 2022 Oat; Avg yield: 0.09% v 0.18% prior; Bid-to-cover: 1.96x v 2.06x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 +0.5% at 3,440, FTSE -0.1% at 7,105, DAX +0.2% at 12,034, CAC-40 +0.9% at 5,048, IBEX-35 +0.9% at 10,461, FTSE MIB +0.4% at 19,907, SMI +0.4% at 8,564, S&P 500 Futures +0.3%]

Market Focal Points/Key Themes: European equity indices are trading generally higher as market participants continue to focus on the upcoming French presidential elections; Banking stocks generally higher but mixed across the board with shares of BNP Paribas, BBVA, and SocGen trading higher in the Eurostoxx, but with shares of ING and Deutsche Bank trading lower; shares of Schneider Electric trading notably higher in the index after releasing Q1 sales results; shares of Unilever trading notably higher in the FTSE 100 after releasing Q1 sales results and raising its dividend; energy, commodity and mining stocks trading lower in the index as oil prices consolidate after yesterday’s sell off in WTI and Brent; FTSE 100 underperforming against the board as a result.

A plethora of upcoming scheduled US earnings (pre-market) include Alliance Data Systems, AZZ Inc, BB&T, Bank of New York Mellon, Blackstone, Citizens Financial, Celestica, Quest Diagnostics, DR Horton, Danaher, Dover, GATX, Janus Capital, KCG Holdings, KeyCorp, Nucor, NVR, People’s United Financial, Philip Morris, Pool Corp, PPG Industries, Sherwin-Williams, Snap-On, Sonoco Products, SunCoke Energy, Syntel, Travelers Companies, and Verizon Communications.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Debenhams DEB.UK -4.2% (H1 results), Pandora PNDORA.DK +5.1% (updates financial reporting structure), Publicis PUB.FR +2.2% (Q1 sales), Pernod Ricard RI.FR +1.9% (Q3 sales), Sky SKY.UK +0.1% (9M results, partnership with HBO), Unilever UNA.NL +1.0% (Q1 sales, raises dividend)]

Financials: [Man Group EMG.UK +2.2% (Q1 FUM)]

Industrials: [ABB ABBN.CH +1.5% (Q1 results), Eurotunnel GET.FR +0.8% (Q1 sales), Kuehne & Nagel KNIN.CH -0.5% (Q1 results)]

Technology: [Schneider Electric SU.FR +2.5% (Q1 sales)]

Telecom: [Utility Warehouse TEP.UK +0.2% (trading update)]

Utilities: [Abertis ABE.ES +3.2% (Atlantia said to offer more than €17B)]

Speakers

Japan Cabinet Office (Govt) Monthly Report reiterated view that domestic economy was continuing a moderate recovery although with a delay in some areas

Saudi Energy Min Falih: Have yet to reach target to bring global inventories down. OPEC might have to extend production cuts to reduce oil supply

Kuwait Oil Min Al-Marzouk: Extension of oil production cuts are necessary. Compliance between OPEC and Non-Opec members on agreed upon production cuts was over 90% in March. There was a preliminary agreement from Russia to extend production cuts. Iran said to commit to freezing its oil production at 3.8M bpd for the remainder of 2017 (**Implies a 6-month extension of oil production cuts). If cuts were extended they might be less deep due to stringer demand in H2

Iraq Ruling Coalition: Supports extension of OPEC supply cuts

Russia Energy Ministry spokesperson reiterated view that was too early to consider OPEC cut agreement extension but leaning towards extension of cuts

Currencies

The USD remains soft against the G10 FX pairs that started with last Fiday’s soft retail sales and CPI data from the States.

Political developments remain in focus for Europe. Overall price action has seen a reduced political uncertainty in the UK while significant uncertainties remain within the Euro Zone

GBP/USD recovered from Wed’s decline and remained above the 1.28 level. GBP supported by the view that early elections in the UK diminished prospects of a messy exit from the European Union

EUR/USD back at a 3-week highs and above the 1.0770 area on some buy-stops being elected to offload shorts positions

NZD currency (Kiwi) was firmer after New Zealand Q1 CPI annual reading remained within the target range for the 2nd straight month and highest level since Q3 2011

Fixed Income

Bund futures trade at 162.74 down 51 ticks breaking 163 to the downside on Equity strength and auctions out of Spain and France. Following the break of 163 futures target support at 162.59 initially followed by 162.25. Resistance moves to 163.47 followed by 163.99.

Gilt futures trade at 128.21 down 30 ticks falling in sympathy with Bunds. Support moves to 127.94 followed by 127.82. A move higher targets 128.76 initially followed by 129.14. Short Sterling curve is steepening slightly with Jun17/Jun18 spread widening marginally to 10.5/11bp.

Thursday's liquidity report showed Wednesday's excess liquidity fell to €1.566T a fall of €4B from €1.570T prior. Use of the marginal lending facility fell to €206M from €254M prior.

Corporate issuance saw $12B come to market via 4 issuers led once again by financial names with Bank of America $6.75B 4 part issuance following their earnings and Morgan Stanley $1.75B 7 year issuance accounting for the bulk of the issuance. In the pipeline China Southern Power and State Grid Corp of China have appointed book runners to raise debt. Issuance for the week stands at $23.8B and monthly issuance $56.2B.

Looking Ahead

(BR) Brazil Apr CNI Industrial Confidence: No est v 54 prior

(ID) Indonesia Central Bank (BI) Interest Rate Decision: Expected to leave Reverse Repo Rate unchanged at 4.75%

05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills

05:30 (HU) Hungary Debt Agency (AKK) to sell Floating Bonds

05:30 (UK) DMO to sell £2.75B in 0.5% 2022 Gilts

05:50 (FR) France Debt Agency (AFT) to sell €0.75-1.25B in I/L 2021, 2025 and 2047 Bonds (Oatei)

06:00 (CZ) Czech Republic to sell 6-month Bills

06:00 (PT) Portugal Monthly Economic Survey

06:00 (IL) Israel Q4 Final GDP Annualized: No est v 6.5% prelim

06:45 (US) Daily Libor Fixing

08:00 (PL) Poland Mar Sold Industrial Output M/M: +13.3%e v -0.9% prior; Y/Y: 7.4%e v 1.2% prior, Construction Output Y/Y: +1.0%e v -5.4% prior

08:00 (PL) Poland Mar PPI M/M: 0.0%e v 0.0% prior; Y/Y: 4.7%e v 4.4% prior

08:00 (PL) Poland Mar Retail Sales M/M: +15.4%e v -2.7% prior; Y/Y: 8.6%e v 7.3% prior, Real Retail Sales Y/Y: 6.6%e v 5.2% prior

08:00 (BR) Brazil Mid-Apr IBGE Inflation IPCA-15 M/M: 0.3%e v 0.2% prior; Y/Y: 4.5%e v4.7% prior

08:00 (US) Fed's Powell (moderate, voter)

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Apr Philadelphia Fed Business Outlook: 25.5e v 32.8 prior

08:30 (US) Initial Jobless Claims: 240Ke v 234K prior; Continuing Claims: 2.02Me v 2.028M prior

08:30 (US) Weekly USDA Net Export Sales

09:00 (RU) Russia Gold and Forex Reserve w/e Apr 14th: No est v $395.7B prior

09:00 (BE) Belgium Apr Consumer Confidence: No est v 0 prior

10:00 (US) Mar Leading Index: 0.2%e v 0.6% prior

10:00 (EU) Euro Zone Apr Advance Consumer Confidence: -4.8e v -5.0 prior

10:30 (US) Weekly EIA Natural Gas Inventories

11:00 (CO) Colombia Feb Trade Balance: -$0.7Be v -$0.8B prior, Total Imports: $3.6Be v $3.5B prior

11:00 (BR) Brazil to sell 2023 LFT

11:00 (BR) Brazil to sell 2018, 2019, 2020 LTN Bills LTN

13:00 (US) Treasury to sell 5-Year TIPS

15:00 (MX) Mexico Citibanamex Survey of Economists

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EUR/USD has posted considerable gains in the Thursday session. Currently, the pair is trading at 1.0770. On the release front, German PPI dipped to 0.0%, short of the estimate of 0.2%. In the US, the markets are bracing for weaker readings from two key indicators – Philly Fed Manufacturing Index and unemployment claims. On Friday, the Eurozone and Germany release PPI reports, and the markets will be keeping a close eye on the PMI manufacturing numbers.

All eyes are focused on the French presidential election, with the first round of voting slated for April 23. The race is one of the tightest in decades, with the four front-runners clustered within a few percentage points. Given the closeness and unpredictability of the election, it’s no surprise that final opinion polls before the vote are moving markets. A Harris Interactive opinion poll published on Thursday showed centrist Emmanuel Macron gaining ground, with 25% of the vote. Far-right candidate Marine Le Pen follows with 22%. Next are Republican candidate Francois Fillon and left-wing candidate Jean-Luc Melenchon, both tied at 19%. Le Pen and Melenchon want to hold a referendum on French membership in the EU, so the markets are clearly more comfortable with Macron and Fillion. With this poll showing Macron with a slight lead, the euro has responded positively, climbing to its highest level since March 29. The markets are expecting more volatility as we near Election Day, and French banks will be staffed throughout Sunday night in order to respond quickly to developments in the currency markets after the election results.

Eurozone consumer inflation has been steadily rising, but reversed directions in March. Final CPI slipped to 1.5%, compared to 2.0% a month earlier. The indicator has been steadily rising, and climbed to 2.0% in February, which is the ECB’s inflation target. This had led to speculation that the ECB might have to consider tightening its monetary policy, either by lowering interest rates or tapering its asset-purchase program (QE). The ECB’s asset-purchase program is scheduled to remain in place until December, although the central bank could opt to bring up that date or taper the program if growth and inflation numbers in the Eurozone are unexpectedly strong. There are also political considerations at play, as the ECB is reluctant to make any significant monetary moves with upcoming elections in France and Germany.

With the US economy continuing to perform well, the markets are expecting the Fed to continue to gradually raise rates in 2017. The Fed has broadly hinted that it plans two more rate hikes this year, but there have been calls from some Fed policymakers for three more hikes. However, soft retail sales and CPI numbers in March are likely to make the Fed more dovish, and on Tuesday, the Atlanta and New York Federal Reserve lowered their outlook for US economic growth for the first quarter. The Fed can point to a labor market that is close to capacity as well as strong consumer confidence, but surprisingly, this has not translated into stronger consumer spending, a key driver of economic growth. The odds of a June hike have slipped to 46% according to the CME Group, down sharply from 65% in early April.

GBP/USD – 1.2823

Recent wave: Wave V of larger degree wave (III) has ended at 1.1986 and major correction has commenced from there for gain to 1.3000 and 1.3140-50

Trend: Near term up

Original strategy :

Buy at 1.2750, Target: 1.2950, Stop: 1.2690

Position: -
Target:  -
Stop: -

New strategy :

Buy at 1.2750, Target: 1.2950, Stop: 1.2690

Position: -
Target:  -
Stop:-

As cable retreated after rising to 1.2906, suggesting consolidation below this level would be seen and pullback to 1.2750-57 (38.2% Fibonacci retracement of 1.2515-1.2906) is likely, however, reckon 1.2710 (50% Fibonacci retracement) would hold and bring another rise later, above said resistance at 1.2906 would signal recent upmove is still in progress, we are keeping our view that the wave c as well as larger degree wave B has ended at 1.2109, hence impulsive wave C has commenced from there with wave i of C ended at 1.2616, follow by a correction to 1.2365 (end of wave ii) and wave iii rally is unfolding, hence further gain to 1.2940-50 and possibly psychological resistance at 1.3000 would be seen, however, near term overbought condition should limit upside to 1.3050-60. 

Our preferred count on the daily chart is that cable's rebound from 1.3500 (wave (A) trough) is unfolding as a wave (B) with A ended at 1.7043, followed by triangle wave B and wave C as well as wave (B) has ended at 1.7192, the subsequent selloff is the larger degree wave (C) which is still unfolding with minor wave (III) of larger degree wave 3 ended at 1.1986, hence wave (IV) correction is in progress which could either be a triangle wave (IV) of a complex formation but upside should be limited to 1.3500 and price should falter well below 1.4000, bring another decline in wave (V) of 3 for weakness to 1.1500, then 1.1200.

On the downside, whilst initial pullback to 1.2750-55 is likely, reckon downside would be limited and 1.2700-10 (50% Fibonacci retracement of 1.2515-1.2906) should contain weakness and bring another rally later. Below 1.2690-00 would defer and risk correction to 1.2660-65 but another previous resistance at 1.2616 (wave i top) should remain intact.