FX Daily Planet: London Open

FX Daily Planet: London Open

Click here for the full Note and disclosures.

View for the day

The earnings from the US corpotates, which were released after trading hours in the US, were generally strong. However, these results failed to support equity markets; S&P 500 futures fell 0.3% and Asian equity indices broadly declined with the Nikkei underperformance standing out (-1.3%). Given the Nikkei weakness, JPY broadly strengthened against the G-10 currencies (+0.4% against USD) while other majors stayed in tight ranges.

In the London session, relevant headlines from Greece continue to take the center stage. Notably, EUR’s nominal effective exchange rate calculated by J.P.Morgan reached the lowest level since February last year yesterday where the German –Greece 10-year yield spread widened to above 500bps. Therefore, any further negative headlines/developments from Greece would weigh on EUR. However, its implication for the risk market is more uncertain. Although widening German-Greece spread was accompanied by a broad sell-off in European equities yesterday, such correlation is far from a consistent one (note that, European stocks rallied early this week despite the widening spread). Therefore, a series of earnings from US corporates and US economic releases should be more important for trends in risk markets and the FX market than the Greek issue. From this perspective, weekly initial jobless claims from the US, which had come in at below consensus in the past two weeks, should be watched closely. In particular, as last week was a survey period for April non-farm payrolls, any weak results from today’s claims would heighten concerns over the weak payrolls, hurting risk assets and high beta currencies at the cost of USD and JPY. Also, if weak claims figure pushes USD yields lower, it would weigh on USD/JPY as well. In addition, April PMI survey results from Euro area countries, March retail sales from the UK and March existing home sales from the US should also be in focus.

Overnight news

JPY: March trade surplus slightly smaller at JPY948.9bn vs JPY1020.6bn consensus with both export and import undershooting expectation

JPY: Japan buying in foreign bonds continued for the third consecutive week to the tune of JPY 435.8bn with month-to-date investment in April exceeding JPY 1trn with some part of flow possibly without FX hedging; Meanwhile, foreign buying in Japanese equities continued for the third consecutive week but at a decelerated pace, net buying JPY140.4bn.

CNY: The PBoC auctioned 3-year bills at a yield of 2.74%, down from 2.75% on the last sale on April 8th; the auction yield for 3-month bills remained unchanged at 1.4088%.

US earnings: eBay Q1 earnings at $0.42 vs $0.41 estimate; Starbucks Q1 earnings at $0.29 vs $0.25 estimate; Qualcomm Q2 earnings at $0.59 vs $0.57 estimate; Fidelity National Financial Q1 earnings at $0.07 vs $0.12 estimate. Citrix Systems Q1 earnings at $0.40 vs $0.40 estimate.

UK election: YouGov poll had topline figures of Conservatives 33%(+2), Labours 27%(+1), Liberal Democrats 31%(-3). A drop for the Liberal Democrats, but YouGov has been bouncing back and forth between Lib Dem and Tory leads since the debate

Today’s watchlist (all times BST; +9hrs for Sydney, +8hrs for Tokyo, -5hrs for New York)

CHF: Mar trade balance (CHF bn) @7:15 (Prev: 1.29)

PHP: BSP rate announcement @9: 00 (JPM: 4.00, Cons: 4.00)

EUR: France Apr INSEE business survey (index) @7:45 (Cons: 95); Apr Germany PMI mfg. flash (index, sa) @8:30 (JPM: 60.2, Cons: 60.1); Apr Germany PMI services flash (index, sa) @8:30 (JPM: 55.1, Cons: 55.2); Apr PMI mfg. flash (index, sa) @9:00 (JPM: 57.0, Cons: 56.7); Apr PMI services flash (index, sa) @9:00 (JPM: 54.5, Cons: 54.4); Apr PMI composite flash @9:00 (JPM: 56.2, Cons: 55.9); Spain to auction 4.65% 2025 bonds @9:30; Eurostat publishes EU Government Debt, Deficit data for 2009 @10:00; ECB’s Trichet, Wellink, Papademos, Provopoulous speak in Frankfurt @12:00; Apr consumer confidence flash (%bal of responses, sa) @15:00 (JPM: -17, Cons: -17); EU President Barroso speaks @17:15

GBP: Mar retail sales (%m/m, sa) @9:30 (JPM: 0.5, Cons: 0.6); Mar retail sales ex auto, fuel (%m/m, sa) @9:30 (JPM: 0.5, Cons: 0.4); Mar M4 prelim (%oya) @9:30 (Prev: 3.9); Mar public sector finances (GBP bn) @9:30 (JPM: 22.0); Mar CBI industrial trends survey (%bal) @11:00 (JPM: -34.0)

CAD: Mar leading indicator (%m/m, sa) @13:30 (Cons: 0.7); BoC monetary policy report and press conference @15:30

USD: PepsiCo for 1Q @12 :00 (JPM : 0.740, Cons : 0.754) ; Mar PPI (%m/m, sa) @13:30 (JPM: 0.6, Cons: 0.5); Mar PPI core (%m/m, sa) @13:30 (JPM: 0.1, Cons:0.1); Apr 17th initial jobless claims (000s, sa) @13:30 (JPM: 450, Cons: 450); Feb FHFA house price index (%m/m, sa) @15:00 (Cons: -0.2); Mar existing home sales (mn, saar) @15:00 (JPM: 5.2, Cons: 5.3); Amazon.com for 1Q @21 :00 (JPM : 0.560, Cons : 0.796) ; Microsoft for 1Q @Aft-Mkt (JPM : 0.400, Cons : 0.418) ; American Express for 1Q @Aft-Mkt (JPM : 0.480, Cons : 0.619)

Overnight price action

FX: JPY outperformed the most rising 0.4% whilst NOK underperformed the most falling 0.1% all against USD.

FX vol: vols remained little changed across the board.

Commodities: gold up 0.8% to $1148.2/oz; oil down 0.2% to $83.5/barrel.

Bonds: JGB yields fell 1-2bp in 7 to 20-year sectors while yields remained unchanged for other sectors.

Equities: Asian equities trading in the red with the Nikkei falling 1.3% and the Shanghai falling 0.8%.

Technical View for the day

The never-ending Greek drama unfolds new aspects day by day and keeps the pressure high on the already battered EUR. Having lost most of the recent gains in EUR/USD the market has now reached key-Fib.-support at 1.3379, which needs to be defended on hourly close to keep the door open for a potential recovery to key-Fib.-resistance at 1.3613 and at 1.3769. An hourly close below 1.3350 though would most likely resume the bear-trend with 1.3093/81 as the next major target to focus on. EUR/GBP is also sitting down on crucial weekly/monthly triangle support at 0.8677/70 which if taken out would deliver a fresh sell-signal for a test of the old 0.8400 low and a potential extension to Fib.-support at 0.8249. In connection with a still looming risk market consolidation as long as 1215/22/29 in the S&P500 is not taken out it is worth watching key-support at 1.3290/75 in EUR/CAD, at 1.8567/1.8247 in EUR/NZD, at 7.8417 in EUR/NOK and at 9.5890 in EUR/SEK as only a break below these key-supports would eliminate the increased risk of a stronger bounce.

ENDS

© Scoop Media