- It was pretty sanguine out there and risk-on from the off in FX today.
- Today’s summit between Trump and Kim in Singapore starts at 11am Syd/9am local, 0100hrs GMT.
- Italian finance minister Tria announcing the new coalition’s commitment to the euro.
It was pretty sanguine out there and risk-on from the off in FX today with the Italian finance minister Tria announcing the new coalition’s commitment to the euro. Moreover, saying that the government would seek to meet fiscal deficit reduction in accordance with EU budget responsibility.
Elsewhere, it was really all about sitting tight awaiting today’s summit between Trump and Kim in Singapore starts at 11am Syd/9am local, 0100hrs GMT. Meanwhile, equities on Wall Street made modest gains, the dollar was consolidating between 93.3660-93.6810 and the US 10yr treasury yield was confined to a sideways range of 2.95%-2.97%. Fed fund futures of course still were predicting a rate hike on Wednesday and another by year end.
Currency action, or lack thereof
As for the euro, the bulls scored higher in the improved sentiment around the Italian government that vowed to stay in euro. The 10-year Italian government bond yield dropped hard by 29 basis points, the 2 year -61bp, and Milan equities closed up 3.4%. EUR/USD hit 1.1821 in European trade but fell back to 1.1785 on profit-taking as traders await the ECB and FOMC to unfold.
Sterling was beaten up on much worse than expected UK data, falling to an intraday low of 1.3361 from 1.3441 early European high on the biggest drop in April manufacturing since Oct 2012, (-1.4% vs +0.3% consensus). Goods trade deficit GBP was also a miss at 14.035bln vs 11.35bln expected and so too was Industrial output, -0.8% vs +0.2% consensus. The pair ended modestly up from the lows in NY, at 1.3372 down -0.26%. Jobs, AWE, inflation & retail sales will all be key this week and so too will Brexit developments in parliament starting tonight in the UK morning. As for the cross, EUR/GBP ended NY +0.45% at 0.8814 within a range of between 0.8831-0.8782 as traders expect some talk from the ECB with regards to tapering. USD/JPY was up 0.5% on Monday, with bulls closing in on the 200-D SMAonce again, where an improved tone of risk appetite kept the bears penned up. As for the higher betas, all was pretty quiet, although, with Copper -1.5% and the dollar better bid ahead of the FED, Aussie bulls might find a hard push to break higher on the 0.76 handle today. Gold ended flat and the Kiwi was trapped between 0.7015 and 0.7055.
Key notes from US session
- NZD/USD Technical Analysis: Kiwi flattening out as channel tightens at 0.70
- USD/JPY: bulls break key resistances through to 110 the figure ahead of key events this week
- Weekly commodity movers & shakers – TDS
- North Korea / U.S. summit update: meetings between staffs and representatives are going well and quickly – Trump
- AUD/USD getting comfortable near 0.76 as bullish trend threatens to wash out
Key events ahead in Asia
Analysts at Westpac offered their outlook on the Asia events today as follows: “Australia’s busy data week starts with May NAB business confidence and Apr housing finance approvals at 11:30am Syd/9:30am Sing/HK. The RBA has frequently pointed to strong business sentiment as one reason to justify its upbeat growth outlook, especially non-mining investment. But we do wonder if the NAB survey is entirely representative, given that Apr business conditions was reported at +21, the highest reading since the series became monthly in March 1997 (and equalling the highest level since 1994 in the quarterly survey). The +10 on confidence seems more in line with other measures.
Australian home loan approvals have weakened in recent months, led by investors as macroprudential measures have had the intended effect. We look for a further -3%mth in Apr, with consensus -1.8%.
The Trump-Kim meeting in Singapore starts at 11am Syd/9am local, with a media availability at 6pm Syd/4pm local. The (South!) Korean won and Kospi have shown very little sensitivity to this year’s North Korean switch to dovishness on foreign policy.”
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