Global Markets:

  • China (CNY) M2 Money Supply (MAR) (y/y): 12.1%, Expected: 13.0%, Previous: 13.3%
  • United Kingdom (GBP) BRC Retail Sales Monitor (y/y): -1.7%, Previous: -1.0%
  • RBA: Cash rate to remain steady for some time given economic outlook
  • RBA: Australian Dollar still high by historical standards, less supportive of economy given latest rise
  • RBA: Board saw further promising signs low rates working way through economy
  • RBA: Saw strong pick up in home building ahead, no mention of any concerns at rising home prices
  • RBA: Evidence consumer demand had strengthened, liasion suggested some easing in retail sales
  • RBA: Exports growing strongly, board noted pick up in non-residential building approvals
  • RBA: Falling mining investment, weak public demand to constrain growth for some time
  • RBA: Range of indicators pointed to modest improvement in employment ahead
  • RBA: Jobless rate still expected to edge higher for a time
  • RBA: Moderate growth in wages to help contain domestic inflationary pressures
  • RBA: China data pointed to continued slowdown, though lunar holiday complicated assessment
  • The Nikkei is up 0.80 % and the Australian ASX gained 0.70 % on the day
  • Shanghai didn’t pick up the positive mood in the US stock market; down 0.80 % this morning
  • Gold at $1320 (-0.50 %), Silver at 19.87 (-0.70 %), Crude Oil at $103.27 (-0.80 %)
  • US 10 year yield stands at 2.64

FX Flows/Orders:

  • EUR/USD – dealers report sizeable stops through 1.3790 and a break sub-1.3780 would see momentum selling, while to the topside, offers in better size are lined up at 1.3880 with stops just above.
  • GBP/USD – the 1.67 level held yesterday, but it feels like the market might go for the stops beneath the figure ahead of the CPI release. Expect better demand ahead of 1.6680. Offers from Asian sovereign names at 1.6780.
  • AUD/USD – trading slightly lower post-RBA minutes; banks reported solid bids at 0.9360 and then again at 0.9320/30, including demand from macro funds and other leveraged names. To the topside, offers in size ahead of 0.9450 and pre-0.95 (barrier option).
  • EUR/JPY – the dealing banks reported good turnover yesterday, despite the pair being stuck in a tight range. Orders from speculators on both sides of the range (140.00-20 & 141.40-60), but stops reported as large sub-140.00 and above 141.60.
  • USD/JPY – again talk of decent Japanese bids 101.20-40 (importers & investors), while large stops seen through 100.95 and 100.80. The pair is struggling to break above 102.00 and offers are waiting at 102.20. A clear break of that level could pave the way for a 102.80 test.

Market Sentiment:

The RBA minutes from the April meeting reinforced the message from the past few months. The bank is more confident that the recent pick-up in the economy can be maintained and while it used the standard language ($A too high by historical standard), it is evident that they are more comfortable with the current level of exchange rate. The RBA is likely to maintain its neutral bias and most banks see the RBA easing as done with the next move in interest rates being up.

 Looking ahead, we have the UK CPI and German ZEW releases, followed by US CPI numbers. Fed Chair Yellen is speaking at 15:45 and the market is expecting more dovish comments.

Upcoming Events:

  • 08:15 GMT – Swiss PPI (-0.1 % MoM, -0.8 % YoY)
  • 09:30 GMT – UK CPI (0.2 % MoM, 1.6 % YoY)
  • 10:00 GMT – Euro Zone Trade Balance (13.9B)
  • 10:00 GMT – German ZEW Current Conditions (51.8)
  • 10:00 GMT – German ZEW Economic Sentiment (45.0)
  • 13:30 GMT – US Core CPI (0.1 % MoM, 1.6 % YoY)
  • 13:30 GMT – US CPI (0.1 % MoM, 1.5 % YoY)
  • 13:30 GMT – NY Empire State Manufacturing Index (8.0)
  • 15:00 GMT – US NAHB Housing Market Index (50.0)
  • 15:45 GMT – Fed Chair Yellen speaks