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  • richard evans

EU data this morning in focus, markets stay wary of further Yen moves

Good morning

 

All eyes remain on the Japanese Yen after the intervention sent USDJPY and yen crosses lower.  I say intervention, nothing has been officially confirmed but it does look suspiciously like intervention.  We’ve seen a few smaller dips in USDJPY since the main event on Sunday night, yesterday morning USDJPY fell sharply from 157.10 to 154.55, and late in the day it fell from 156.50 to 155.10.  Whether these moves were from official action or simply an indication of how nervous the markets are is impossible to tell until we get the FX operation data.  USDJPY currently trades a touch below 157.00, a level that seems to have capped the upside overnight.  GBPJPY is 196.60, EURJPY 167.90.

 

GBPUSD is currently 1.2530 having seen a high overnight of 1.2565.  Plenty of eyes on EUR this morning given we have several data releases including EU inflation and GDP.  EURUSD is currently 1.0705 having recovered from a dip to 1.0690 earlier this morning.  GBPEUR clawed its way back up above 1.1700 yesterday afternoon and has held above there ever since, currently 1.1705 from a high around 1.1720.  ECB officials have recently been talking about the geopolitical factors that could push inflation higher, but for now still seem fixed on a June rate cut.  What happens after June remains to be seen.  The market thinks we’ll have more rate cuts but ECB will want to see what impact a June cut will have on EUR, plus monitor incoming data closely.

 

Plenty of attention of course on interest rates.  The divergence between Fed and other central banks is becoming more and more apparent, with the Fed likely to remain on hold, even seeing talk of higher rates, while others such as ECB and to some extent BoE are clearly looking at rate cuts.  Mind you, I see Goldman Sachs still see potential for two Fed rate cuts this year, the first in July and the next in November.  They think inflation reports will soon come in softer, offering some breathing space for the Fed.  The Fed rate meeting begins today, with the announcement coming tomorrow evening. 

 

Elsewhere, AUD lost ground after weaker than expected retail sales data, the headline coming in at -0.4% vs an expected +0.2%, with the previous month also being revised lower.  AUD also wasn’t helped by weaker Chinese PMIs overnight.  GBPAUD has seen a high of 1.9230 this morning having been as low as 1.9045 early yesterday morning.  I had recently mentioned the potential for RBA rate rises in the coming months, but weak data will certainly dampen some of those calls.  China is now closed for the rest of the week for May holidays.

 

I mentioned China gold reserves a while back.  They have been building them for some time now, I’m sure I read that they now total around $135billion.  There is some speculation as to why they are building such reserves, some are thinking it is to eventually support China in moving away from the USD’s reserve currency status, while others see it as a war chest to protect them from possible sanctions that would almost certainly arise after a Taiwan invasion.  Either way, there is always a reason and while it may be unfair to be thinking the worst, we should certainly be aware and prepared for it.  Meanwhile China re flexing their muscles with some aggressive action against Philippine ships in a disputed area of the South China Seas. 

 

Humza Yousaf did resign from his post as Scotland First Minister, choosing to go before he was pushed.  Attention now will be on who stands for the leadership role and whether the winner of that race will get the support of any opposition parties with whom they could develop some sort of power sharing arrangement.

 

In other news, Leicester secured the Championship title with a win over Preston yesterday evening.  The race is on for the second automatic promotion spot, Ipswich, currently in third, could move above Leeds if they beat Coventry this evening.  A good chance this comes down to the last match of the season on Saturday. 

 

We had a decent day weather-wise yesterday, hoping for more of the same today but the rest of the week looks a bit mixed.  Temperatures still lower than we’d like for this time of year, surely they have to pick up at some point?  It’ll be May tomorrow!

 

Have a great day

 

-  08.55 german unemployment

-  09.00 german GDP

-  10.00 EU HICP, GDP

-  13.30 US employment cost index

-  13.30 CAD GDP

-  14.45 US Chicago PMI

-  15.00 US consumer confidence

-  22.00 RBNZ financial stability report

-  23.45 NZ unemployment

 

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