Thursday 4th May: European Open Briefing

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Thursday 4th May: European Open Briefing 1

Global Markets:

  • Asian stock markets: Shanghai Composite down 0.10 %, Hang Seng fell 0.40 %, ASX 200 lost 0.50 %, Nikkei closed for holiday
  • Commodities: Gold at $1241 (-0.60 %), Silver at $16.65 (+0.60 %), WTI Oil at $47.70 (-0.20 %), Brent Oil at $50.70 (-0.20 %)
  • Rates: US 10-year yield at 2.32, UK 10-year yield at 1.08, German 10-year yield at 0.34

News & Data

  • Australia Trade Balance (AUD) Mar: 3107M (exp 3250M; prev 3574M)
  • Australia Exports (MoM) Mar: 2.0% (prev 1.0%)
  • Australia Imports (MoM) Mar: 5.0% (prev -5.0%)
  • Australia HIA New Home Sales (MoM) Mar: -1.1% (prev 0.2%)
  • New Zealand ANZ Job Advertisements (MoM) Apr: 2.8% (prev 1.6%; prev rev 2.0%)
  • New Zealand ANZ Commodity Price Index (MoM) Apr: -0.2% (prev 0.4%)
  • South Korea BoP Current Account Balance (USD) Mar: 5931.8M (prev 8400.2M)
  • PBoC Fixes USDCNY Reference Rate At 6.8957 (prev fix 6.8892 prev close 6.8985)
  • Asian stocks retreat, dollar holds near six-week high on hawkish Fed – RTRS
  • Fed holds interest rates steady, downplays economic weakness – RTRS

Markets Update:

The Federal Reserve kept rates unchanged, as expected. However, the statement was perceived as more hawkish than expected, as the central bank downplayed weakness in the first-quarter economic growth. This is a hint that a rate hike in June seems quite likely.

The Dollar appreciated post-FOMC, especially against the emerging market currencies. Amongst the major pairs, the commodity currencies felt most of the pressure. AUD/USD fell from 0.7470 to a low of 0.74 in Asia. Further losses to at least 0.73 seem likely in the near-term. Similar price action was seen in NZD/USD, which reversed at 0.6970 yesterday and fell to a low of 0.6870 after the FOMC.

The reaction in EUR and GBP was rather mild. EUR/USD only declined to 1.0880, and then continued with its consolidation. Meanwhile, USD/JPY caught up on momentum. The pair rallied to 112.90 in Asia. A clear break above 113 would suggest that a rally towards 115 could follow.

Upcoming Events:

  • 08:45 BST – Italian Services PMI
  • 08:50 BST – French Services PMI
  • 08:55 BST – German Services PMI
  • 09:00 BST – Euro Zone Services PMI
  • 09:30 BST – UK Services PMI
  • 10:00 BST – Euro Zone Retail Sales
  • 13:30 BST – US Trade Balance
  • 13:30 BST – Canadian Trade Balance
  • 15:00 BST – US Factory Orders
  • 17:30 BST – ECB President Draghi speaks
  • 21:25 BST – BoC Governor Poloz speaks

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