Thursday 19th May: European Open Briefing

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Global Markets:

  • Asian stock markets: Nikkei down 0.05 %, Shanghai Composite gained 0.40 %, Hang Seng fell 0.30 %, ASX 200 declined 0.70 %
  • Commodities: Gold at $1259 (-1.20 %), Silver at $16.87 (-1.50 %), WTI Oil at $47.50 (-1.40 %), Brent Oil at $48.15 (-1.60 %)
  • Rates: US 10 year yield at 1.86, UK 10 year yield at 1.44, German 10 year yield at 0.17

News & Data:

  • Australia Employment Change (Apr): 10.8K (exp 12.0K prev 26.1K)
  • Australia Full Time Employment Change (Apr): -9.3K (prev rev -10.1K)
  • Australia Part Time Employment Change (Apr): 20.2K (prev 36.2K)
  • Australia Unemployment Rate (Apr): 5.7% (exp 5.8% prev 5.7%)
  • Australia Participation Rate (Apr): 64.8% (exp 64.9% prev 64.9%)
  • Japan Machine Orders (MoM) Mar: 5.5% (exp -2.0% prev -9.2%)
  • Japan Machine Orders (YoY) Mar: 3.2% (exp 0.8% prev -0.7%)
  • Japan Housing Loans (YoY) Q1: 1.9% (prev 2.2%)
  • New Zealand ANZ Consumer Confidence Index (May): 116.2 (prev 120.0)
  • New Zealand ANZ Job Advertisements (MoM) Apr: 1.7% (prev rev 3.1%)
  • Kuwait Oil Minister: OPEC strategy working as demand is rising and non-OPEC supply is falling
  • Kuwait Oil Minister: Sees oil price at $50/bbl at year end; currently produce 3mln/bpd, plan to reach 4mln/bpd by end of 2020: BBG

FOMC Meeting Minutes:

  • Most judged it would likely be appropriate to hike in June if data remains consistent with Q2 GDP pickup, firmer labour market conditions and progress on inflation
  • Some concerned that markets may not have accurately assessed the chance of a June hike
  • Policymakers expressed a range of opinions on whether there would be enough incoming data before June 15 meeting to warrant a hike
  • Some judged outlook as now roughly balanced, many others continued to see downside risks
  • Fed saw it as appropriate to hike in April, two worried that US behind the curve on inflation
  • Many expressed confidence that US growth would pick up in coming quarters but some saw risk that a more persistent slowdown underway
  • Generally saw risks from global and financial developments as having diminished but still warranted close monitoring
  • Risks to the projection for inflation were still judged as weighted to the downside, reflecting the possibility that longer-term inflation expectations may have edged down

Markets Update:

The US Dollar strengthened after the release of the FOMC minutes as the Fed signalled that a rate hike next month is still possible, if data remains consistent.

EUR/USD fell from 1.1290 to 1.1215 following the release of the minutes. It has bounced from there and traded in 1.1215-30 range overnight. Meanwhile, GBP/USD was more resilient and only declined from 1.4630 to 1.4580. The Pound has been bid since a poll yesterday showed that 55 % would vote for the UK to remain a member of the EU and 37 % for leaving. In Asia, the pair extended losses slightly, but only to 1.4670. Support is now seen at 1.4525.

USD/JPY is back above 110, although profit-taking flows have capped the topside at 110.30 and the pair fell back to 109.95 briefly. Bids are expected at 109.50 and 109.20, while offers lie at 110.50-60.

AUD/USD declined from 0.73 to 0.7230 post-FOMC and later extended losses to 0.7208. NZD/USD fell from 0.68 to 0.6735 immediately after the minutes release and later posted a low of 0.6725 in Asia.

Upcoming Events:

  • 09:00 BST – Euro Zone Current Account
  • 09:30 BST – UK Retail Sales
  • 12:30 BST – ECB Meeting Minutes
  • 13:30 BST – US Initial Jobless Claims
  • 13:30 BST – US Phily Fed Manufacturing Index
  • 13:30 BST – Canadian Wholesale Sales
  • 15:00 BST – US CB Leading Index
  • 15:30 BST – FOMC Member Dudley speaks

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