News

America's Roundup: Dollar hits 2018 peak, supported by yields, retail sales data, Wall Street ends lower, Gold hits fresh 2018 low, Oil supported by Iran sanction fears, holds near 2014 highs-May 16th, 2018

Market Roundup

• US Apr Retail Sales MM, 0.3%, 0.3% forecast, 0.6% previous.

• US Apr Retail Sales Ex-Autos MM, 0.3%, 0.5% forecast, 0.2% previous.

• US Apr Retail Ex Gas/Autos, 0.3%, 0.3% previous.

• US Apr Retail Control, 0.4%, 0.4% forecast, 0.4% previous.

• US Mar Business Inventories MM, 0.0%, 0.1% forecast, 0.6% previous.

• US May NAHB Housing Market Index, 70, 69 forecast, 69 previous.

• US May NY Fed Manufacturing, 20.10, 15.00 forecast, 15.80 previous.

• US w/e Redbook MM, 0.8%, 0.8% previous.

• US w/e Redbook YY, 4.9%, 4.2% previous.

• Fed's Kaplan sees U.S. inflation rising but not “running away”.

• Fed's Williams sees no rise in neutral rate from stronger growth.

• Fed's policy language “served its purpose,” will need revisit –Williams.

• Trump Fed nominee signals skepticism on QE.

• North Korea suspends talks with South over military exercises.

• Argentina peso jumps 4 pct after central bank offers intervention.

• U.S. 'looking for a deal' with China on trade –White House adviser. .

• With few options, Iran and Europe try to save nuclear deal.

Looking Ahead – Economic Data (GMT)

• 15 May 23:50 Japan Q1 GDP QQ, 0.0% forecast, 0.4% previous

• 15 May 23:50 Japan Q1 GDP QQ Annualised, -0.2% forecast, 1.6% previous

• 15 May 23:50 Japan Q1 GDP QQ Pvt Consmp Prelim, 0.0% forecast, 0.5% previous

• 15 May 23:50 Japan Q1 GDP QQ Capital Expend., 0.4% forecast, 1.0% previous

• 15 May 23:50 Japan Q1 GDP QQ External Demand, 0.0% forecast, 0.0% previous

• 16 May 00:30 Australia May Consumer Sentiment, -0.6% previous

• 16 May 01:30 CN House Prices YY, 4.9% previous

• 16 May 01:30 Australia Q1 Wage Price Index QQ, 0.6% forecast, 0.6% previous

• 16 May 01:30 Australia Q1 Wage Price Index YY, 2.1% forecast, 2.1% previous

• 16 May 03:00 New Zealand Apr RBNZ Offshore Holdings, 56.5% previous

• 16 May 04:30 Japan Mar Industrial Output Rev, 1.2% previous

• 16 May 04:30 Japan Mar Capacity Util Index Chg MM, 3.3% previous

Looking Ahead – Events, Other Releases (GMT)

• N/A ECB's Draghi, Praet and Coeure speak at an ECB conference to mark the departure of ECB VP Vitor Constancio

• N/A ECB Governing Council meeting. No interest rate announcements scheduled

• 08:10 BOE new Chief Cashier, Sarah John: Panellist at the Association of Corporate Treasurers' Annual Conference 2018

• 11:00 The IMF will present preliminary findings from the annual assessment of economic and financial development in Denmark

• 16:15 Bank of Canada Deputy Governor Lawrence Schembri will give speech at CFA Society Ottawa and Ottawa Economics Association in Ottawa

• 22:30 Federal Reserve Bank of St. Louis President James Bullard gives opening remarks before the Homer Jones Memorial Lecture in St. Louis, Missouri

Currency Summaries

EUR/USD is likely to find support at 1.1800 levels and currently trading at 1.1843 levels. The pair has made session high at 1.1919 and hit lows at 1.1821 levels. The euro slipped lower against the U.S. dollar on Tuesday as dollar was helped by a rise in U.S. Treasury yields and upbeat U.S. retail sales data. U.S. retail sales increased marginally in April as rising gasoline prices cut into discretionary spending, but consumer spending appeared on track to accelerate after slowing sharply in the first quarter. The Commerce Department said retail sales rose 0.3 percent last month after surging 0.8 percent in March. April's increase was in line with economists' expectations. Retail sales in April advanced 4.7 percent from a year ago. The benchmark government yield reached a high of 3.095 percent, blowing through the key psychological level of 3 percent it hit in late April. US economic outlook got a boost from other data on Tuesday showing factory activity regaining momentum in May on strong orders growth. While manufacturers reported paying more for raw materials, they were absorbing much of the higher costs, a sign inflation will probably continue to increase at a moderate pace.The dollar index, which measures the greenback against a basket of six other currencies, was up 0.8 percent at 93.332, after rising as high as 93.457. The euro fell to a fresh 2018 low of $1.1821.

GBP/USD is supported in the range of 1.3424 levels and currently trading at 1.3508 levels. It reached session high at 1.3528 and dropped to session low at 1.3448 levels. Britain's pound declined sharply against the dollar on Tuesday to its lowest since December after a rise in U.S. Treasury yields helped the greenback resume its recent rally. Weak economic data and a decision by the Bank of England to hold interest rates and cut its growth projections have confounded sterling bulls in the last month after a period outperforming other major currencies. BoE Governor Mark Carney has expressed caution over the state of the UK economy but said that interest rates are still likely to rise by the end of this year. But it is the dollar's broad-based, strong rally that has hurt sterling this week. U.S. retail sales numbers showing a moderate increase in April also supported the dollar. The pound fell as much as 0.6 percent to $1.3452 in late European trading, its lowest since Dec 29. Against the euro sterling traded up 0.1 percent 87.91 pence, reinforcing that the move in sterling was dollar-led. Earlier on Tuesday sterling had edged up against the dollar after data showed UK employment jumped, although the official numbers also undermined that wage growth that was yet to rise sharply. The data showed annual growth in earnings, excluding bonuses, edged up to 2.9 percent in the three months to March, as anticipated in a poll, after a 2.8 percent rise in February.

USD/CAD is supported at 1.2762 levels and is trading at 1.2864 levels. It has made session high at 1.2924 and lows at 1.2850 levels. The Canadian dollar hit a nearly one-week low against its U.S. counterpart on Tuesday as the greenback broadly rose and investors weighed prospects of a deadline being met for a new NAFTA trade pact between Canada, the United States and Mexico. The U.S. dollar  rose against a basket of major currencies as data showed a rise in U.S. retail sales and the U.S. 10-year Treasury note yield climbed further above the 3 percent threshold to its highest since July 2011.Mexico's economy minister, Ildefonso Guajardo, said he does not expect to meet a deadline set for Thursday to reach a new North American Free Trade Agreement that could be presented to the current U.S. Congress. Losses for the loonie came despite the price of oil, one of Canada's major exports, rising to a 3-1/2-year high. U.S. crude prices were up 0.75 percent at $71.49 a barrel, supported by tight supply and planned U.S. sanctions against Iran that are likely to restrict crude oil exports from one of the biggest producers in the Middle East. The Canadian dollar was trading 0.7 percent lower at C$1.2866 to the greenback. The loonie hit its weakest level since Wednesday at C$1.2924.

AUD/USD is supported around 0.7411 levels and currently trading at 0.7472 levels. It hit session high at 0.7524 and made session lows at 0.7447 levels. The Australian dollar dipped against its U.S. counterpart on Tuesday as the country's central bank signalled it would keep rates steady for some time while the greenback rose after upbeat retail sales data. The Australian dollar was last at $0.7523 from a two-week high of $0.7568 touched on Friday. The Reserve Bank of Australia (RBA) released minutes of its May policy meeting on Tuesday, which showed it saw scant reason to lift rates as inflation and wage growth remained subdued. The RBA inserted a new line in the minutes saying “it would be appropriate to hold the cash rate steady and for the Reserve Bank to be a source of stability and confidence. “Analysts said the RBA may be trying to signal a steady policy path at a time when the quasi-judicial Royal Commission inquiry was unearthing years of malpractice and criminal behaviour at the country's largest financial firms. Prospects of a thaw in U.S.-China trade tensions also supported the U.S. dollar as President Donald Trump pledged to help Chinese telecom company ZTE Corp “get back into business, fast.” The comments on Sunday came ahead of a second round of trade talks between U.S. and Chinese officials this week.

Equities Recap

European shares inched up on Tuesday after a choppy session as higher Brent crude prices lifted oil stocks to their highest level since September 2014, offsetting a drop in telecoms.

UK's benchmark FTSE 100 closed up 0.28 percent, the pan-European FTSEurofirst 300 ended the day up by 0.18 percent, Germany's Dax ended down by 0.03 percent, France’s CAC finished the day up by 0.17 percent.

U.S. stocks fell on Tuesday, and the Dow snapped an eight-day winning streak, after bond yields rose, strong retail sales data stoked inflation concerns and investors fretted about looming trade talks between the United States and China.

Dow Jones closed down by 0.80 percent, S&P 500 ended down by 0.71 percent, Nasdaq finished the day down by 0.83 percent.

Treasuries Recap

A solid rise in U.S. retail sales in April rocked a teetering U.S. Treasuries market on Tuesday as a wave of selling propelled the benchmark 10-year note's yield through a key technical support, sending it to a near seven-year high.

The 10-year Treasury yield on Tuesday reached 3.095 percent, its highest level since July 2011. It was last at 3.076 percent, up 8 basis points, its biggest one-day yield rise since March 2017.

The two-year yield, which is most sensitive to traders' view on Federal Reserve policy, was up over 3 basis points at 2.581 percent after touching 2.589 percent, the highest since August 2008.

Commodities Recap

Gold slid more than 1 percent on Tuesday, falling for a third day to hit its lowest this year as a rise in U.S. borrowing costs pushed up the dollar and overshadowed the impact of strife in Gaza.

Spot gold lost 1.6 percent at $1,290.91 an ounce by 1:35 p.m. EDT (1735 GMT), earlier hitting its lowest since late December at $1,289.40. U.S. gold futures for June delivery settled down $27.90, or 2.12 percent, at $1,290.30 per ounce.

Oil prices ended a shade firmer after retreating from multi-year highs hit early in the day on Tuesday, supported by concerns that U.S. sanctions on Iran are likely to restrict crude exports from one of the biggest producers in the Middle East.

Brent crude oil settled at $78.43 a barrel, up 20 cents, or 0.3 percent, after reaching an intraday peak of $79.47 a barrel, up $1.24 and its highest since November 2014.

U.S. light crude closed 35 cents, or 0.5 percent, higher at $71.31 a barrel, also not far off the day's peak at $71.92, its highest since November 2014.
 


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