Markets in Risk On Mode Ahead of the G7 Meeting Tomorrow

In stark contrast, US markets were higher adding to the gains made in the Asian session over the last four days. European markets are trying to make up lost ground but progress is slow compared to global counterparts. Oil has stabilized this week after its fall from $72.80 and is encamped at the $65.00 level. The USD is softer against most other currencies bar the AUD with the pair down -0.09% to 0.76604. Tomorrow the G7 meeting will begin which are set to dominate headlines into the weekend.

Global stocks extended gains on Thursday morning on tech sector positive momentum. Investors will be watching the G7 meeting scheduled on the weekend that can shed light on global trade.

US Nonfarm Productivity (Q1) came in at 0.4% against an expected 0.6% from 0.7% previously, showing efficiency slipping and ultimately upward pressure on inflation. Unit Labour Costs (Q1) was 2.9% against an expected 2.8% from2.7% prior, showing what has become a seasonal increase expected in this metric but these costs can be passed onto consumers. There is growing evidence, albeit anecdotal that labor costs are increasing as workers are becoming harder to find. Trade Balance (Apr) was $-46.2B versus an expected$-49.0B against a previous $-49.0B which was revised up to $-47.2B, rebounding off the low levels, at -57.6%, not previously seen since 2008. EURUSD fell from 1.17793 to 1.17614 following this data release.

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Canadian International Merchandise Trade (Apr) was $-1.90B versus an expected $-3.40B against $-4.14B previously which was revised up to $-3.93B. This fell to match the low of November 2016 last month and it is now off the lows, but still at very low levels. USDCAD fell from 1.29090 to 1.28577 following this data release. Ivey Purchasing Managers Index s.a. (May) was 62.5 against an expected 69.7 from a previous 71.5. Ivey Purchasing Managers Index (May) was 69.5 against 70.4 previously. The data came in under last month’s reading which was the highest since 2011 and greatly exceeded expectations. This data is showing robust growth, continuing one of the longest positive runs with over 20 months above 50.0 and is now back into the previous range.USDCAD moved higher from 1.28615 to close the session at 1.29615 after the data release.

Australian AIG Construction Index was released and came in at 54.0 against a previous reading of 55.4 which is down from the April reading of 57.2. This data has been above 50 for fifteen consecutive months showing the strong run ongoing in the sector. AUDUSD fell from 0.76698 to 0.76608 following this data release.

  • EURUSD is up 0.27% overnight, trading aroun1.18047.
  • USDJPY is down –0.21% in the early session, trading at around 109.946
  • GBPUSD is up 0.18% this morning trading around 1.34345.
  • Gold is up 0.03% in early morning trading at around $1,296.88
  • WTI is down -0.22% this morning, trading around $65.17

This article was written by FxPro

High-tech Sector Lifts Markets, Italy Remains a Concern

Asia is following this trend as early Wednesday trading is showing growth of around 0.5%. Conversely, shares in the financial sector are again under pressure due to the decrease in profitability of “safe” bonds. On the currency market the dollar index decreased on Tuesday by 0.2%, EURUSD overcame 1.17, GBPUSD managed to rise above 1.34, and USDJPY improved to 110.

Economic data dispels fears

The recent improvement in market sentiment is attributable to a series of strong data release, including the U.S. labor market data and Tuesday’s publication of non-production ISM. This activity indicator showed the improved acceleration of growth in the service sector. The survey also indicated that price pressure remains high. This band of strong data was supported Wednesday morning by the better than expected growth of Australia’s Q1 GDP by 1.0%  This is good sign thanks to impressive demand for metals and coal, which the country heavily exports, Attributing to approximately 50% of the growth in the economy in the first quarter of 2018.

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Italy still on the radar

Whilst Italy has ceased to be the main cause of turbulence in global financial markets, the ongoing political problems in the country have remained a concern for investors. The plans of the new government imply an impressive increase in budget expenditures, which deters investors because of the huge debt burden of the country and anemic growth rates (just 0.5% per year on average for the last 20 years). News from Italy sparked a new round of sales of its debt with yield increase in profitability of 10-years obligations from 2.54% to 2.80%. Yields of U.S. and German debt decreased during the day, suppressing the dynamics of the securities of the financial sector.

This article was written by FxPro

US Treasury Secretary Mnuchin urges President Trump to exempt Canada from Tariffs, Global Stocks Steady

USDCAD had already sold off from its high of 1.30657 but extended the move and is now trading around 1.29450. Whether Canada gets a pass or not remains to be seen but traders have piled in on the move, with any headlines to the contrary potentially setting up a short squeeze. Australian GDP was released this morning with a beat of 1.0% against 0.9% (QoQ)(Q1) expected. The 1.0% level has been the top of the range in recent years. AUDUSD climbed from 0.76332 to 0.76720 and is now just down off the highs.

Global stocks mostly higher on Wednesday morning as trade wars fears ebb. Investors are looking forward to the G7 meeting later on this week.

UK Markit Services PMI (May) came in at 54.0 against an expected 53.0 from 52.8 previously. This data is down from its 2013 high of 62.5 but it has bounced from 53.0, which was somewhat of a floor for the last 18 months. The number beat the consensus as expected to move back into this range above 53.0 showing modest growth. GBPUSD moved higher from 1.33341 to 1.33921 following the data release.

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US ISM Non – Manufacturing PMI (May) was 58.6 versus an expected 57.5 against 56.8 previously. This is still in the upper range of the data releases we have seen over the past seven years but off the highs reached before the financial crisis above 65.0. The recent data shows a beat on expectations which was above the previous reading suggesting an increase in demand going forward. EURUSD fell from 1.16672 to 1.16523 following this data release.

  • EURUSD is up 0.05% overnight, trading aroun1.17225.
  • USDJPY is up 0.11in the early session, trading at around 109.896
  • GBPUSD is up 0.12% this morning trading around 1.34105.
  • Gold is up 0.18% in early morning trading at around $1,298.67
  • WTI is up 0.64% this morning, trading around $65.92

This article was written by FxPro

RBA Leaves Rates on Hold at 1.50%, Global Stocks Stable as Trade War and Geopolitics Concerns Ease

Yesterday’s session was quite after a pickup in volatility last week and there has been little in the way of movement overnight. This is despite some negative headlines that possibly sapped some of the market strength over the last 24 hours. Crude Oil has continued to fall with WTI reaching $64.50 as supply increases and reserves rise but gains on Tuesday morning to trade at $65.22. The decline has been dramatic with prices at a high of $72.80 only two weeks ago. Iran has said that they will increase capacity to produce uranium gas after the US pulled out of the Iran deal last month.

Global stocks steady on Tuesday morning as investors shrug off trade wars concerns and geopolitical uncertainty. Markets are in a positive mood since the beginning of the week after US job data released on Friday and the coalition formed in Italy.

The RBA has left rates on hold at their meeting saying inflation is likely to remain low for some time and household consumption remains a source of uncertainty. AUDUSD rallied from 0.75800 yesterday to 0.76660 but fell back to 0.7641 at the time of writing.

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UK Construction PMI (May) was out at 52.5 against an expected headline number of 52.0 from a prior number of 52.5. The recovery from the low created in April at 47.0 stalled and matched the previous read last month. The construction industry is seen as being under a degree of pressure since the high levels of 2014 at 64.6 showing contraction in the index but has recovered somewhat. GBPUSD moved higher after this data release from 1.33560 to 1.33982.

Eurozone Producer Price Index (YoY) (Apr) was 2.0% against an expected 2.4% from a previous 2.1%. Producer Price Index (MoM) (Apr) was 0.0% against an expected 0.4% from a previous 0.1%. The recovery in the Euro area is weaker but growing despite some sluggish economic data. PPI data is in danger of slipping under 0.0% signaling falling prices. EURUSD moved higher from 1.17075 to 1.17441 following this data release.

US Factory Orders (MoM) (Apr) were -0.8% against an expected -0.3% from 1.6% previously which was revised up to 1.7%. The decrease in orders exceeded expectations but remains in the recent range of this data point over the last three years has been between +3% and -3.5%. However, the drop shows a decrease in demand for US produced goods. EURUSD moved higher initially from 1.17157 to 1.17250 but then sold off to 1.16770 in the time after this data release.

  • EURUSD is down -0.10% overnight, trading aroun1.16852.
  • USDJPY is up 0.07in the early session, trading at around 109.891
  • GBPUSD is down 0.02% this morning trading around 1.33119.
  • Gold is down –0.08% in early morning trading at around $1,290.91
  • WTI is up 0.11% this morning, trading around $64.98

This article was written by FxPro

Positive Mood after Strong US Payrolls and an Angry G7

Strong U.S. data

Last Friday’s data release, of NFP, average hourly earnings and an 18 year low in unemployment, exceeded market expectations and had a beneficial effect on markets. Non-farm employment increased by 223K in May, which was significantly better than the expected 190K. This growth indicates that, after some decrease in speed at the beginning of the year, the US economy is once again gaining momentum. The annual growth rate of wages accelerated from 2.6% to 2.7%. It is not so strong as to cause markets to fear Fed Rate increases, but it is good enough to dispel the fears of a prolonged slowdown in the economy.

The Week Starts with a Positive Mood

U.S. stock indices added more than 1% on Friday and early indications from Asia are showing a similar improvement. Growth of 0.3-0.4% is expected from Europe due to increased demand for risks. USD failed to consolidate its position on the foreign exchange market. The reaction to Friday’s data was particularly mooted. It appears that the mitigation of fears around interest rates in the U.S. has helped kept USD on the offensive. In early Monday trading the dollar index has returned to the lows seen on Friday. It is important to understand that the labour market data was not negative for the USD, instead the current movement has been caused by a decrease in the degree of fear and a fall in the demand for safe-heavens.

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G7 vs. USA

The introduction of steel and aluminum tariffs by the US has united all other countries in a rare critique of this approach. The G7 summit will occur at the end of this week where Trump personally will face his critics. Iran is trying to saddle the tide of discontent with U.S. policy and has called on countries to keep the nuclear deal from which the US recently withdrew. It may seem counterintuitive, but this news was positively perceived by the markets, as they reduce the risks of the surge of protectionism in world trade.

This article was written by FxPro

A Beat on US NFP Data Spurs Markets Higher Despite Trade Tensions

The mood is mainly positive due to better US job creation is seen in the NFP data which has carried stocks higher despite headwinds such as escalating trade disputes between the US and a plethora of other countries. Canadian PM Trudeau has called for the imposition of US trade tariffs on Canadian products an affront and announced retaliatory measures. China said it would tear up any trade deal with the US if they impose tariffs against China. The risk is that sentiment shifts and catches traders off balance as volatility increases. AUD outperformed today as data beat across the board with AUDUSD up 0.77% to 0.76230.

UK Markit Manufacturing PMI (May) came out at 54.4 against an expected headline number of 53.5 and 53.9 prior. The data beat the consensus and the previous number but remains weak following the high created in December at 58.2. New order inflows, strengthening job creation and demand were factors in the outperformance. EURGBP fell from 0.87996 to a low of 0.87854 following this data release.

US Non-Farm Payrolls (May) came in at 223K against an expected 188K from a prior 164K which was revised down to 159K. This measures the change in the number of employed people in May and shows a strong beat despite the revision in the prior data. The Unemployment Rate (May) was 3.8% against an expected 3.9% with a prior reading of 3.9%. Average Hourly Earnings (YoY) (May) was 2.7% against an expected 2.7% against 2.6% previously. Average Hourly Earnings (MoM) (May) was 0.3% against an expected 0.2% from 0.1% previously. Labour Force Participation Rate (May) was 62.7% against an expected 62.6% from a prior reading of 62.8%. This data shows that there has been an increase in earnings but it has still not accelerated past 0.3%. This would lead to an increase in inflation which markets have reacted negatively to recently. GBPUSD rallied from 1.32832 to a high of 1.33370 after these data releases.

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At 13:30 GMT, Canadian Markit Manufacturing PMI (May) was 56.2 against an expected 55.4 from the previous 55.5. This data has exceeded the peak from February of 55.9, when it matched the April 2017 number. The last four readings have shown a softening in the data setting expectation for this reading to fall again but the unexpected beat sent the USDCAD price lower to support at 1.29581 before recovering to 1.29842 after the data release.

  • EURUSD is up 0.33% overnight, trading aroun1.16961.
  • USDJPY is up 0.13in the early session, trading at around 109.639
  • GBPUSD is up 0.22% this morning trading around 1.33721.
  • Gold is down –0.11% in early morning trading at around $1,291.55
  • WTI is unchanged this morning, trading around $65.75

This article was written by FxPro

Italian and German News Provide Support to EUR and Global Markets

Italy has a chance

European and American markets retraced the previous day’s declines and Asian exchanges have rebounded from two-month lows this morning. Not to be outdone, Crude Oil jump by 3 dollars (4%).

EURUSD rose from 10-month lows by 1.2% to 1.1685 in early Thursday trading. From a technical perspective, Wednesday rebound could be the start of a longer recovery after a month and a half period of falling, where the single currency fell against the dollar by more than 7%, returning half of the last year’s growth.

Inflation in Europe

Yesterday’s contrast in statistics from the U.S. and Europe surprised many. German data showed a very strong rise in consumer prices in May. CPI increased to 2.2%YoY, higher than the expected 1.9% after a rise of 1.6% in April. Such a difference between expectations and actual is uncommon to this indicator resulting in a tangible surprise for the euro. On Thursday the markets will closely follow the report on the whole euro area. Strong data will further help EUR continue its recovery.

U.S. slowing down?

The data from the US, on the contrary, was disappointing. Employment data from ADP proved to be worse than expected by setting up the prospect of a softer than expected NFP report on Friday. The GDP growth rate for the Q1 was revised down to an annualized 2.2% QoQ. However, the Fed’s Beige book helped USD to stabilize, noting an increase in the economic growth estimates compared to the previous report. USD therefore still has the opportunity to continue to grow as we close the week if employment data confirms a more upward trend in wages and growth. Many investors will be closely watching today’s weekly Unemployment Claims data which may provide clues to Friday’s NFP report.

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Oil impulse

On Wednesday Crude Oil experienced impressive growth after 4 trading sessions of declines. In addition to the growing demand for risks due to some calming of the situation in Italy and the decline of USD, the recent commentary from the Central Bank of Russia (CBR) has helped Oil trade higher. The CBR’s Financial Stability Report stressed the benefits of OPEC+ agreements to meet the balance of supply and demand. Such reports typically turn to oil, but the markets are more susceptible to positive news at the moment. It is unlikely that this should be considered the position of the central bank and will somehow affect OPEC + negotiations in the coming months. In early Thursday trading, Brent has retraced from Wednesday’s spike to $77.90 to trade around $77.20 in early trading.

This article was written by FxPro

Markets Rebound as Italian Worries Subside

Reports in the Washington Post today are suggesting that US President Trump plans to announce metal tariffs on Mexico, Canada and Europe set to come into force as early as tomorrow. The deadline for the EU’s relief from US tariffs expires tomorrowJune 1st. There has been a muted market reaction to the rumor but should it be officially announced volatility can spike higher as a result. USDMXN did react by selling off from 19.82115 to 19.71140.

The Italian President has told the Populist election winners that he is ready to engage with them when they are ready. This has given the Five Star Movement and League parties a second chance at attempting to form a government. The parties heavily criticised the President after he blocked their earlier cabinet nominations. Stocks were higher yesterday as Treasury yield rose with an easing in concerns when the Populist parties insisted that they have no plans to force Italy to leave the Euro or create an Italexit of the EU. EURUSD rallied from lows around 1.15000 to 1.1711 while the Italian stock market gapped higher from 21060.00 to close at 21855.00.

German Harmonised Index of Consumer Prices (YoY) (May) was 2.2% against an expected 1.8% from a prior reading of 1.4%. Harmonised Index of Consumer Prices (MoM) (May) was 0.6% against an expected 0.3% from a previous -0.1%. This data beat the previous reading on a yearly basis, bringing the data back in line with the high from early 2017. The beat in the monthly reading brings that data back above zero. EURGBP sold off from 0.87571 to 0.87320 following this data release.

US Gross Domestic Product Annualized (Q1) was 2.2% against an expected 2.3% from 2.3% previously. This data is holding just above 2.0% although it has slipped in the last two quarters from 3.3%. Gross Domestic Product Price Index (Q1) slipped to 1.9% against an expected 2.0% from 2.0% previously. This data has dropped back under 2% after rising above that level for the past two quarters. Personal Consumption Expenditures Prices (QoQ) (Q1) came in at 2.6% against an expected 2.7% from 2.7% previously. Core Personal Consumption Expenditures Prices (QoQ) (Q1) came in at 2.3% against an expected 2.5% from 2.5% previously. Personal consumption data has been rising steadily as Americans spend more on durable goods, consumer products and services. EURUSD moved higher from a low at 1.15940 to a high of 1.16754 as a result of this data.

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Bank of Canada Interest Rate Decision and Rate Statement were released yesterday evening. The Rate Decision was left on hold at 1.25% after the Bank hiked rates in January. The Rate Statement dropped the reference to being “cautious” on rates and on the need for “monetary policy accommodation”. It said higher rates will be needed to keep inflation near the target. A gradual approach will be taken, guided by incoming data and assessment of the economy’s sensitivity to rate movements. USDCAD plunged from 1.30111 to a low of 1.28351 as a result.

  • EURUSD is up 0.14% overnight, trading around 1.16778.
  • USDJPY is down -0.15% in the early session, trading at around 108.747
  • GBPUSD is up 0.18% this morning trading around 1.33076.
  • Gold is up 0.16% in early morning trading at around $1,303.25
  • WTI is down -0.25% this morning, trading around $68.0

This article was written by FxPro

Italian Political Instability Causes Deleveraging Issue in the Financial Markets

Italy’s political problems raise the issue of the possibilities of Italy’s withdrawal from the European Union. Whilst these risks seem ridiculous, investors are aware that Trump and Brexit have created political “black swans” which have become more commonplace recently.

Additionally, memories about Greece remain fresh in the minds of the markets. That issue due to the size of the economy of the country (less than 2%) has seen it grow into a eurozone existential crisis. This instability caused EUR to lose approximately 20% in the acute phase of the crisis. More importantly was the loss of confidence in commercial and central banks, causing a fall in the share of EUR in reserves and world trade.

We also saw growing sales for bonds of Britain, Spain and various smaller countries. Conversely, many portfolios were replenished with the papers of Germany, the Netherlands, Belgium, Finland – countries with strict fiscal discipline. Japan in this context once again acts as a haven for capitals, against the U.S. where the yield of US Treasuries saw growth yesterday.

Moving capital towards reliability creates a very wide plume in the financial markets because of their deep interconnection. Escape to safe-havens may trigger wider financial deleverage. There is a lot of room to reduce as this indicator recently has reached historical highs. Problems in debt markets can provoke a reversal of debt burden reduction, threatening to turn into a serious sale. Leverage acts as a dry powder, it can be stored safely and accumulated for a long time, but the “Italian problem” is a “lit match” in the room. Whether it will be possible to repay is the question of time and prudence of regulators, in particular, the ECB.

It is quite hard to believe that the European Central Bank will adjust its pace with regards to QE. Short-term, this can lead to the persistence of pressure on the common currency and threatens the proliferation of security traction in other developed markets.

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For developing markets this situation is even more dangerous – there are already enough problems. The deleverage problem concerns not only the demand for shares but also the price of Crude Oil which, historically, is drastically reduced during such periods as it was in 2008, 2012 and 2015.

This article was written by FxPro

Italian Political Crisis Sparks Fear in Markets, European Stocks Steady

The Italian President vetoed the nomination for Finance Minister by the populist government last week. The resulting collapse in the coalition led to the President appointing former IMF Director Carlo Conttarelli as Prime Minister. However, Conttarelli is expected to lose a confidence vote in parliament which will lead to new elections as early as July. The Italian Stock market was down 2.66% with losses extending after hours to levels not seen since July 2017 but on Wednesday FTSE MIB adds 0.97%. Asian equities are down again with the Nikkei down 1.5% and the Korean Kospi down 1.57%. European share markets open slightly higher. The Euro has fallen to 1.15100 as Bank of Italy chairman Ignazio Visco said that Italy risks losing the “asset of trust” with investors. Italian bond spreads have risen to the highest levels in four years.

US S&P/Case-Schiller Home Price Index (YoY) (Mar) was 6.8% against an expected 6.4% from a prior 6.8%. This measure has been holding a steady improvement since late 2014 low, with this reading showing a beat on expectations to match the prior reading. USDJPY fell from a high of 109.057 to 108.812 as a result of this data.

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New Zealand Building Permits s.a. (MoM) (Apr) were -3.7% against a previous 14.7% which was revised down to 13.0%. This data is within a range from 20.0 to -12.0. The data, as a result, can appear volatile and can be affected by seasonal factors. NZDUSD fell from 0.69025 to 0.68925 after the data release.

  • EURUSD is up 0.13% overnight, trading around 1.15541.
  • USDJPY is down -0.02% in the early session, trading at around 108.730
  • GBPUSD is up 0.08% this morning trading around 1.32598.
  • Gold is up 0.02% in early morning trading at around $1,298.99
  • WTI is down -0.33% this morning, trading around $66.6

This article was written by FxPro

Stocks and Euro Sink on Political Uncertainty in Italy, Turkish Lira Stable

The euro currency’s rebound lost its steam after reaching the 1.1730 area. During the European session, EURUSD lost just over 1%, coming close to the 6-month lows near 1.1550. The flow of strong data from the United States, signs of a slowdown in Europe and the threat of a political crisis in Italy caused the euro to decline by 6.5% in 7 weeks. Italian stock index, FTSE MIB dropped 3.21% on Tuesday.

GBPUSD continues its fall to trade near 1.3250, while USDCAD has seen a decline to trade near to 1.30. USD has given up gains against JPY and has stabilized against a number of EM (emerging markets) currencies. This combination is very unusual as the growth in JPY is often perceived as a safe haven. It is very likely that after a short correction the EM currencies could experience a new wave of downward pressure.

Oil Prices Under Pressure

Brent had begun the week and falling to 74.60 per barrel but has recovered to around 75.60 at the start of Tuesday’s trading. It is possible that the lull is due to low trading activity and today more players will add to price pressure, due to expectations of rising production in the coming months.

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Turkey’s Central Bank Stabilises Turkish Lira

Among notable movements in the markets, it is worth highlighting the rollback of the Turkish lira after the press release of the central bank on the simplification of the monetary policy framework, making the weekly repo rate (now 16.5%) as its Key rate. Earlier last week the Bank of Turkey increased this rate by 3 percentage points. All these measures are positively perceived by the markets and helped TRY to stabilize after falling 20% in May. The positive news for TRY has a favorable impact on the overall market attitude of developing countries. It also helps to reduce the yield of the American 10-year Treasuries, which makes the purchase of USD denominated debt less attractive.

Early morning Asian markets were in cautious mode due to protests in Brazil caused by rising fuel prices. These protests make the markets wonder whether current quotes are a serious obstacle to further global growth. In these circumstances, a major energy consumer, Asia, is also experiencing a decline in stock prices. The political situation in Italy, the caution of Asian exchanges and the increased demand for safe assets are likely to keep the demand for USD during Tuesday trading.

Among significant publications today we have the release of the Consumer sentiment indicator in the U.S. This indicator is close to multiyear highs, and the expected decrease can be a sign of the peak and turning to downwards.

This article was written by FxPro

Markets in Turmoil: Global Stocks Fall, Euro Sinks, Oil Hits Six Weeks Low

The market turmoil continues as Oil reached a six week low yesterday after backing away from strong resistance at $73.00 early last week. The Inventory data on Wednesday, showing an unexpected build of 5.778M, compounded the pressure followed by increases in US Oil Rig counts to 859 on Friday and reports of Saudi Arabia and Russia agreeing to ease output cuts ahead of the next OPEC meeting next month in Vienna. The rumor is that the easing of cuts will add an additional 1 million bps to the market which could see further falls in the price which is currently at $66.77. USDTRY fell to 4.55475 as lower prices would ease inflation worries.

Global stocks fall on Tuesday morning and the Euro sinks to six months low as the Italian turmoil and US-North Korea talks about new sanctions continue to add uncertainty into the markets. The Volatility Index (VIX)  rose 9.38% to 14.44.

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German IFO – Current Assessment (May) was 106.0 against an expected 105.5 from 105.7 previously. IFO – Expectations (May) was 98.5 against an expected 98.5 from 98.7 prior. IFO – Business Climate (May) was 102.2 against an expected 102.0 v 102.1 previously. The data shows a steadying business climate in Germany after the fall in the March data but with a lot of work to do to regain the previous highs. This data cannot be ignored as it surveys 7,000 businesses and is a leading indicator of economic direction. EURUSD moved up from 1.16841 to 1.17285 after the data was released.

US Durable Goods Orders ex Transportation (Apr) were 0.9% against an expected 0.5% from 0.0% previously which was revised up to 0.4%. Durable Goods Orders (Apr) was -1.7% against an expected -1.4%% from 2.6% previously which was revised up to 2.7%. This data series diverged last month with ex-transports missing expectations and the headline data exceeding its consensus. This divergence continued but the data showed a fall in headline data and a rise in ex-transports. EURUSD moved up from 1.16650 to 1.16865 after this data release.

  • EURUSD is up 0.05% overnight, trading around 1.16297.
  • USDJPY is down -0.30% in the early session, trading at around 109.081
  • GBPUSD is up 0.04% this morning trading around 1.33138.
  • USDCAD is down -0.06% overnight, trading around 1.29859
  • Gold is up 0.03% in early morning trading at around $1,298.00
  • WTI is up 0.21% this morning, trading around $66.77

This article was written by FxPro

Global Stocks Mixed, Italian Bonds Highest Since 2011. Oil Prices Continue to Drop

Friday saw the markets focusing on Crude Oil. Oil experienced a daily decline of 3.2% is the first weekly decline for almost two months. Early Monday trading has seen the downward pressure continue as Brent prices move closer to $75 per barrel, the lowest levels since the beginning of May and 7% of the peak levels reached the last week. Similarly, WTI lost 9% from recent highs.

Recent comments from Russian and Saudi Arabian officials on the readiness to ease their restrictions on production as soon as next month appears to be the main factor forcing Oil prices lower. Such a stance appeared after oil reached $80 per barrel and demand outlook appeared to be strong.  In addition, Saudi Arabia and Russia appear dissatisfied with the growth of production in the United States and the fact that they are actively trying to expand their market share.

However, there are great risks of repetition of the scenario that occurred in 2014, when the reluctance of OPEC to concede its share resulted in excessive growth in production and provoked the collapse of Crude Oil prices from above $100 pb to near $30 pb in a little more than a year.

Previously the decline was initiated by fixing profits, after reaching an important mark of $80 per barrel by Brent, as well as a significant increase in crude oil reserves with stable production in the United States. Other factors include the signs of a slowdown in the European economy, clear problems with growth in developing-country markets and a stronger dollar.

Crude Oil can trade contrarian to this but these periods are usually short and much more likely to end with a retracement in oil prices rather than a reversal of dollar strength.

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On Friday, the dollar index reached its highest since November 2017 mainly because of downward pressure on the euro. The weakening of the common currency was attributed to the nomination of a Eurosceptic for an important economic post in Italy that could lead to further nationalistic undertones. As a result, EURUSD fell below 1.1650 on Friday. Early Monday trading has seen EURUSD trade higher to 1.1720 due, in part, to the Italian President not accepting the nomination.

The recent weakness of EUR is likely to remain as the Italian situation could turn into a political crisis in a country where the President does not have sufficient power to make changes. Italian bonds in May displayed the highest growth yields since the end of 2011 – levels not seen since the Greek debt crisis. Sustained growth in bond yields in Europe may cause the ECB to leave rates low in the region for much longer, which could lead to a serious depreciation in EUR. However, Italian bonds strengthen on Monday morning.

It is worth remembering that during the Greek debt crisis EUR lost almost 20% in just over a year on the fears of a eurozone collapse, and only the assurances of Draghi “to do whatever it takes” avoided a worse outcome.

On Monday morning Asian news reports that the United States is still preparing for the North Korea Summit.

This article was written by FxPro

Global Stocks Mostly Higher; US Dollar, Oil and Italy in Focus

The Italian Election has delivered a Coalition Government that “will put Italian national interests first”. This is creating a tension with the EU as the new government has proposed billions of euro in tax cuts, increased social welfare payments and scrapping pension reform, all of which would break the fiscal discipline rules of the EU.

The FTSE MIB is trading higher today after falling to the April lows yesterday around 23083.00. Global Stocks edge higher on Tuesday morning as investors embrace US-China ‘hold-on’ status.

Chicago Fed National Activity Index (Apr) was 0.34 against an expected 0.14. This shows a healthy economy with the 2018 average at a higher level than previous years.

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FOMC Member Bostic said that inflation was likely to run a bit above 2% for a while and that the US is close to or at full employment but wage growth is tepid. Higher interest rates would also allow the Fed to counter an economic downturn in the years ahead. Slow wage growth slows the pace of hikes for the Fed.

FOMC Member Kashkari spoke yesterday saying that he feels that there might still be some slack in the labor market and wages have not picked up. He said that he wanted to allow the economy to continue to strengthen. He said that he is closely watching the yield curve for signs the economy might falter. If the yield curve flattens the spread between short and long-term bonds decreases, meaning short-term bonds are less risky and more attractive than long-term bonds.EURUSD is down -0.06% overnight, trading around 1.17841.

  • USDJPY is down -0.12% in the early session, trading at around 111.09
  • GBPUSD is up 0.06% this morning trading around 1.3456.
  • USDCAD is down -0.10% overnight, trading around 1.2759
  • Gold is down -0.16% in early morning trading at around $1,290.20
  • WTI is down -0.14% this morning, trading around $72.67

This article was written by FxPro

Equity Markets and USD Rise as US Could Tolerate NAFTA Deadline in 2019 for the Right Deal

US Treasury Secretary Steve Mnuchin gave an interview on NAFTA over the weekend where he said that President Trump is “more determined to have a good deal than he’s worried about any deadline”. He spoke about the US acceptance of the deadline slipping into 2019 once the right deal for the US is achieved. USDCAD is trading around 1.28735 with USDMXN trading around 19.90000. There is an element of “Risk on” this morning as equity markets moved up and USDJPY pushed to new highs. Gold has slipped lower while WTI Oil is higher, trading around $71.89.

Mnuchin also mentioned the US-China trade war and declared that it is currently ‘on hold’.

Canadian Consumer Price Index (MoM) (Apr) was 0.3% versus an expected 0.4% against 0.3% previously. Consumer Price Index (YoY) (Apr) was 2.2% versus an expected 2.3% against 2.3% previously.

Canadian Retail Sales ex Autos (MoM) (Mar) were -0.2% versus an expected 0.5%. Retail Sales (MoM) (Mar) were 0.6% against an expected 0.3% from 0.4% previously which was revised up to 0.5%. Retail sales exceeded expectations after missing expectations for the December and January readings with a higher revision welcome. USDCAD moved higher from 1.27961 to 1.28838 after the data release.

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Baker Hughes US Rig Count numbers matched the previous release last Friday, which showed that there were 844 Oil rigs in operation. With Oil at the highest levels in recent times, on the back of a bigger than expected draw in inventories on Wednesday; this data can set the tone for traders as they look to the week ahead.

Japanese Exports (YoY) (Apr) were released, coming in at 7.8% against an expected 8.1% from 2.1% previously. Imports (YoY) (Apr) were also released, coming in at 5.9% against an expected 9.6% from -0.6% previously. Merchandise Trade Balance Total (Apr) came in at ¥626.0B against an expected ¥405.6B. This data shows a fall in both Imports and Exports but an increase in the Trade Balance.

  • EURUSD is down -0.18% overnight, trading around 1.17475.
  • USDJPY is up 0.55% in the early session, trading at around 111.343
  • GBPUSD is down -0.14% this morning trading around 1.34378.
  • USDCAD is down -0.07% overnight, trading around 1.28715
  • Gold is down -0.49% in early morning trading at around $1,286.41
  • WTI is up 0.60% this morning, trading around $71.89

This article was written by FxPro

Reports UK is Prepared to Stay Within EU Customs Union Send GBP Higher

The Government agreed on a new “backstop” earlier this week to avoid a hard border on the island of Ireland. This came after rejecting earlier EU proposals ahead of the looming June deadline. This was despite objections from Foreign Secretary Johnson and Environment Secretary Gove. GBP has rallied well and is the strongest currency as we approach the European open, up from 1.34554 to 1.35687 against the USD. EURGBP is down to 0.87206 from yesterday’s high of 0.87823. The USD has weakened somewhat, with EURUSD reaching a high of 1.18373 overnight.

Eurozone Consumer Price Index – Core (YoY) (Apr) came in as expected, unchanged at 0.7%. Consumer Price Index (MoM) (Apr) was also as expected at 0.3%, from 1.0% previously. Consumer Price Index (YoY) (Apr) was also as expected, unchanged at 1.2%. Consumer Price Index – Core (MoM) (Apr) was as expected at 0.2%, from 1.4% prior. CPI data is showing a decrease in the monthly figures, with yearly figures remaining in line with the previous reading. EURUSD fell from 1.18376 to a low of 1.17662 after this data release.

US Housing Starts (MoM) (Apr) were 1.287M against an expected 1.310M, from a previous number of 1.319M, which was revised up to 1.336M. Building Permits (MoM) (Apr) were 1.352M against an expected 1.350M, with the prior reading of 1.354M, which was revised up to 1.377M. This data shows a decrease in activity from previous readings. These data points have been recovering since hitting lows of 0.46M and 0.49M respectively after the financial crisis. GBPUSD halted its decent at 1.34668 when the data was released.

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US Industrial Production (MoM) (Apr) was released, coming in at 0.7%. The consensus was for 0.6% from 0.5% previously, which was revised up to 0.7%. This measure rebounded strongly, to reach the highest reading since December 2014 in March, after slipping below the zero line previously. Capacity Utilization (Apr) was also released at this time, with a reading of 78.0% against the expectation of 78.4%, from 78.0% previously, which was revised down to 77.6%. The readings came in line with previous data, with capacity failing to create a new high and missing expectations. USDJPY rose from 110.056 to 110.341 after the release.

This article was written by FxPro

US Dollar Strength Leads Currencies to Break Key Levels, Gold Tumbles Below $1300

Japanese GDP fell to -0.2% from 0.0% expected for the quarterly Q1 figure and -0.6% from 0.0% expected for the yearly figure. This drop was forecasted, with an expectation for a recovery to higher numbers going forward into Q2. USDJPY didn’t react much and is still trading in the same range around 110.275, after breaking above 110.000 yesterday.

FX, in general, was stable overnight after some key levels were broken yesterday, with EURUSD falling back under 1.19000 and GBPUSD falling under 1.35000 on USD strength. Gold took a tumble under strong support at 1300.00, triggering bearish technical patterns. Equity markets also fell yesterday, with the US 500 dropping to test support at 2700.00.

UK Average Earnings excluding Bonus (3Mo/Yr) (Mar) came in at 2.9% as expected, from 2.8% previously. Claimant Count Change (Apr) was 31.2K against an expected 7.5K, from a previous reading of 11.6K, which was revised up to 15.7K. ILO Unemployment Rate (3M) (Apr) was as expected, unchanged at 4.2%. Average Earnings including Bonus (3Mo/Yr) (Mar) was as expected at 2.6%, from 2.8% previously. Claimant Count Rate (Mar) was 2.5% against 2.4% previously. Wage growth was expected to continue to tick up after stabilizing at 2.5% and moving up in February but failed to do so, falling below last month’s reading of 2.8%. The unemployment rate is at multi-decade lows, which is when wage growth would normally be higher as competition to attract workers takes hold. The BOE will study wage data for any indication of a change, in case they need to change their hawkish tone. GBPUSD moved higher from 1.35276 to 1.35582 after this data release.

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Eurozone Gross Domestic Product s.a. (QoQ) (Q1) was as expected, unchanged at 0.4%. Gross Domestic Product s.a.(YoY) (Q1) was also as expected, unchanged at 2.5%. Industrial Production w.d.a. (YoY) (Mar) was released at 3.0% against a consensus of 3.7%, from a prior of 2.9%, which was revised down to 2.6%. Industrial Production s.a. (MoM) (Mar) was 0.5% against an expected 0.6%, from -0.8% previously, which was revised down to -0.9%. The monthly figure dipped to -1.0% in February but rebounded last month, with a much stronger rebound this time, marginally missing expectations. EURUSD moved higher from 1.19160 to 1.19290 after this data release, but then sold off later in the day.

US Retail Sales (MoM) (Apr) were as expected at 0.3%, from 0.6% previously, which was revised up to 0.8%. Retail Sales ex Autos (MoM) (Apr) were 0.3% against an expected 0.5%, from 0.2% prior, which was revised up to 0.4%. Retail Sales Control Group (Apr) came in as expected at 0.4%, from 0.4% prior, which was revised up to 0.5%. The sales slipped after last month’s beat, which was revised higher yesterday, with the current readings coming in as expected. USDJPY broke higher from 109.913 to reach a high for the day of 110.341 after this data release.

This article was written by FxPro

Asian Stocks Mostly Lower; Chinese Retail Sales Data Registers Lowest Reading in Over a Decade

They believe that China is unable to meet the US request to reduce its trade surplus “by $200B by 2020 without causing significant disruptions to its economy”. They also believe that this measure would be incompatible with the Chinese government’s policy objectives. Chinese Retail sales were released earlier at 9.4%, missing the expected 10.0% and the previous 10.1% reading. This is the lowest reading for this data in over a decade. Industrial Production came in at 7.0%, beating expectations of 6.3%, and the previous 6.0% reading. USDCNY is up overnight from 6.3385 to 6.3486.

German Gross Domestic Product (QoQ) (Q1) was 0.3% against an expected 0.4%, from 0.6% prior. Gross Domestic Product (YoY) (Q1) was 1.6% against an expected 1.8%, from 2.3% prior. Gross Domestic Product w.d.a. (YoY) (Q1) was released with a reading of 2.3%, against a consensus number of 2.4% and a prior of 2.9%. This data shows a continued decline in German GDP numbers.

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The RBA released its Meeting Minutes earlier this morning, with the board agreeing there was not a case for a near-term move in policy. They also agreed that, given the current circumstances, the next rate move would likely be up rather than down. Unemployment and inflation are likely to show only a gradual improvement. AUDUSD started to rally from a low of 0.75216 in the lead-up to the release, then peaked at 0.75372 after the event. It has since fallen to a fresh low of 0.75069.

This article was written by FxPro

Iran Deal Back in the Headlines as Potential Fallout Comes to Light

She spoke via phone with the Iranian President yesterday, in advance of a meeting of the UK, France, Germany, and Iran in Brussels tomorrow. Over the weekend, US National Security Advisor John Bolton said that US sanctions on European companies that maintain business dealings with Iran were possible.

It remains to be seen if this threat will be upheld, which would be a further blow to US/European relations. EURUSD is higher at 1.1975, having risen as far as 1.19690 earlier. Elsewhere, Canadian PM Trudeau has said he is optimistic a NAFTA agreement can be reached. US Lawmakers want a deal by Thursday in order to give enough time to get it through Congress. USDCAD dropped to 1.27693 after closing at 1.27985 on Friday.

Canadian Unemployment Rate (Apr) was as expected, unchanged at 5.8%. Participation Rate (Apr) was 65.4% versus an expected 65.5%, against 65.5% prior. Net Change in Employment (Apr) was -1.1K versus an expected 17.4K, against a prior 32.3K. USDCAD moved up from 1.27321 to 1.27764 after this data release.

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US Michigan Consumer Sentiment Index (May) was 98.8 versus an expected 98.5, against a previous 98.8. USDJPY rose from 109.256 to 109.328 following this data release.

Baker Hughes US Oil Rig Counts was released with a headline number of 844 from last week’s number of 834. As this number creeps higher, more and more rigs are coming into operation, increasing the supply of oil and adding downward pressure on prices. WTI Oil fell from $71.37 to $70.41 after this data release.

This article was written by FxPro

Oil Moves Higher as Trump Withdraws from Iran Deal

US President Trump has long said that the deal was “no good” and part of his election campaign was to end US participation in the agreement. The other signatories of the deal have expressed their willingness to maintain the agreement with Iran in a move that isolates the US. Whether the withdrawal is part of a negotiation tactic by the President remains to be seen and it will depend on the outcome of the Iranian response, with Iran’s Parliamentary Speaker saying that the country has no obligation now to honor the commitments of the agreement.

The Australian Budget was released yesterday. The budget contained a series of tax cuts aimed at lower income taxpayers and forecasted a drop in the deficit from 20.5B to 14.5B. The expectation is for the budget to have a small surplus in 2019/20 of 2.2B. AUDUSD continued to fall from 0.75181 to 0.74352 during this release.

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Canadian Housing Starts s.a (YoY) (Apr) were released and came in at 214K against an expected 220K, from a previous 225K last month. This data is performing strongly despite the decline this month. The previous three readings beat expectations but this miss breaks the winning streak. The data showed a drop in single detached dwellings and a rise in multiple unit dwellings. USDCAD dropped from a high of 1.29838 to 1.29633 as a result of this data.

US JOLTS Job Openings (Mar) was released with a headline number of 6.550M against an expected 6.101M, from 6.052M previously, which was revised up to 6.078M. This metric exceeded forecasts and the previous high of 6.31M reached in March, showing job creation is strong and the labor market is dynamic. GBPUSD fell to a low of 1.34843 but turned from there to trade higher for the rest of the day.

This article was written by FxPro