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Trending Update for Wednesday 17/5
S&P 500 closed above 2400 for the second time ever despite worries over Trump. That said, USD-index plummeted to new lows and Nikkei also closed 0.53% lower. USDJPY and EURJPY both lost ground in the Asian hours as the risk appetite faded with fresh allegations from former FBI Director James Comey coming to light. Comey alleged that he has recorded proof of Donald Trump asking him to drop an investigation into actions of Former NSA Adviser Michael Flynn. US Senator John McCain is the latest to up the pressure on Trump as he said that the Trump leaks scandal has reached “Watergate size and Scale”; this is unlikely to help calm market nerves.
The European equities also opened lower with DAX, CAC40, and FTSE100 down 0.8%, 0.6% and 0.3%, respectively. Yesterday’s API report showed a rise in US oil stock inventory and the WTI fell as expected. OPEC is in a predicament over a global supply glut and this could weigh on the commodities bloc currencies.
Elsewhere, the UK unemployment rate fell to 4.6% from 4.7% due to an unexpectedly large gain in employment numbers (121K Actual vs. 21K expected) but average earnings (excluding bonus) also came in line with expectations at 2.4%. Overall the employment data suggests an improvement in the UK labour market.
There is not much data due for the rest of the day post the Euro-area inflation rate (final) at 0900 GMT. We will hear from Mester and Bullard but focus to remain on US politics.
GBPUSD Made a week high of 1.2959
Trending Update for Thursday 18/5
Nikkei 225 closed down 1.32% at 19553.9. The European Equities have also opened lower with FTSE, DAX, and CAC each down 0.5%, 0.2% and 0.1%, respectively. We are likely to see the risk off trade gather further pace as market is now starting to consider Trump’s impeachment as a tail risk. The risk has increased after James Comey agreed to testify to the US senate next Wednesday. We see a bid for safe-haven currencies and bonds with risky currencies likely to be offered.
Overnight, Japan reported better than expected GDP numbers (0.5% actual vs 0.4% expected). The capital expenditure was also up more than expected. Positive economic data and heightened risk from the Trumps scandal will help JPY make further short-term gains. Elsewhere, The Australia unemployment rate fell to 5.7% more than the 5.9% expected. The employment change was also up 37.4K compared to 5K expected. This bodes well for the economy but AUD is likely to be driven by risk sentiments.
The UK retail sales will be due at 0830 GMT followed by the ECB monetary policy meeting minutes at 1130 GMT and ECB speakers, Lautenschlager, Mersch, and Draghi at 1230, 1245 and 1700 GMT, respectively.
Trending Update for Friday 19/5
The European equities opened higher with FTSE, DAX, and CAC 40 up 0.3%, 0.1% and 0.2%, respectively. Earlier, the Asian equities were also slightly positive with Nikkei 225 closing 0.19% higher. The crude prices have also rallied with the WTI front month now testing the $50 handle. The dollar index has had another day in the red but risky currencies are having a better day versus the USD then we have seen over the past few days.
JPY is the weakest among the G10 currencies today and this reflects some calmness in the markets. The US 10 Year yield is now back to 2.25%, up 2bp from open, and up 7bp from yesterday’s low. That said, the Dollar is still a sell but position versus the risk currencies may be a better alternative. GBPUSD long seem to be the go to trade.
The economic calendar is quiet once again but we will have the Canadian inflation rate later on. USDCAD is now at risk of falling sharply if inflation figure surprise to the upside. In terms of ECB speakers, we have speeches from Coeure and Constancio at 1100 GMT and 1200 GMT The Market remains focused on forward guidance for the June meeting.
Trending Update for Monday 22/5
The European equities have opened firmer with FTSE, DAX and CAC 40 up 0.3%, 0.2% and 0.2% respectively. Nikkei closed 0.45% higher but early USDJPY gains have now been faded. USD is improving versus the European currencies and is slightly weak versus the commodity currencies. That said, there is still no change in the underlying theme as USD remains pressured. Comey’s Testimony to the US senate on Wednesday remains the key focus for investors given the FOMC minutes are likely to be stale given the recent political developments. We also don’t expect Fed’s Harker to provide any clues on the monetary policy at 1400 GMT today as he will be speaking on the link between physical and economic wellbeing.
TheEuro-area finance minister will meet today but for us, key data release will be the Euro-area Manufacturing PMI (flash) on Tuesday; we have seen eight consecutive rises until April hence if May’s numbers also show further improvement EUR can have another move higher. The data calendar is very quiet today but we will hear from Norges Bank Governor Olsen and RBA deputy Governor Debelle today.
