FINANCIAL MARKET REVIEW FOR JUN 06, 2018 The U.S. Dollar settled mixed on Tuesday against individual currencies, but lower against the total basket of currencies as investors sorted through a cluster of domestic reports, and increasing concerns that the United States could pull out of its trade agreement with Canada and Mexico. June U.S. Dollar Index futures settled the session at 93.871, down 0.115 or -0.12%. Forex The currency that had the largest impact on the U.S. Dollar Index was the Euro. It was bolstered on Tuesday after Bloomberg, citing sources, reported that the European Central Bank could conclude its next policy meeting this month with a public announcement on when its quantitative easing program would end. Traders believe the ECB will make a pre-emptive strike by making the early announcement ahead of the June 14 meeting to calm investors previously rattled by the political turmoil in Italy. Investors reacting positively to the Bloomberg story, settling the EUR/USD at 1.1717, up 0.0023 or +0.20%. Also helping to underpin the Euro was a speech by Italy’s new Prime Minister Giuseppe Conte, which reassured investors that leaving the single-currency was not on his agenda. However, investor confidence in Italy was rattled somewhat by Conte’s announcement of new government tax cuts and higher welfare. This news sent Italian bond yields higher. The Canadian Dollar and Mexican Peso fell sharply on Tuesday against the U.S. Dollar after White House economic adviser Larry Kudlow said that President Donald Trump is considering holding separate talks with Canada and Mexico. This raised concerns that the Trump Administration may be leaning towards scraping the entire North American Free Trade Agreement (NAFTA). Gold A drop in U.S. Treasury yields due to trade issue concerns over the possible scrapping of the NAFTA helped boost gold futures on Tuesday. Geopolitical concerns also led to flight to safety buying into U.S. Treasuries which drove yields lower. Traders were reacting to a speech by Italy’s new Prime Minister Giuseppe Conte, who vowed to enact economic policies that could balloon the nation’s already-heavy debt load. Crude Oil After hitting a two-month low earlier in the session, U.S. West Texas Intermediate and internationalbenchmark Brent crude oil reversed course to close higher on Tuesday. Prices were under pressure early due to concerns over rising U.S. production and fear of an increase in OPEC-led output. However, short-sellers and profit-takers covered positions aggressively late in the day after the American Petroleum Institute reported a larger-than-expected drawdown in U.S. crude inventories. conomic data released through the Asian session this morning was on the lighter side, limited to 1st quarter GDP numbers out of Australia.
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FINANCIAL MARKET REVIEW FOR JUN 06, 2018 For the Aussie Dollar, there was some much needed good news after a perceived dovish rate statement issued by the RBA on Tuesday. Year-on-year, the economy grew by 3.1%, coming in well ahead of a forecasted 2.7% and 4th quarter 2.4%. Quarter-on-quarter, the economy grew by 1%, coming in ahead of a forecasted 0.8% and well ahead of an upwardly revised 0.5% for the 4th quarter of last year. Reported by the ABS, growth was led by exports of mining commodities, which accounted for half of the growth in GDP, with mining industry growth value added growing by 2.9% in the quarter. Other notable contributions to growth in the 1st quarter included: Dear Mr.Benitez,
Private non-financial corporations profits, which increased by 6%, the largest increase in the last year, support by improved terms of trade. Private investment through strong investment in machinery and equipment also contributed. General government final consumption expenditure increased 1.6% and was up 5.1% through the year. Household consumption rose by 0.3% in the quarter and by 2.9% for the year, with the household savings ratio falling to 2.1%, the lowest since Dec-07. In contrast, growth in construction of new dwellings eased slightly, as reflected in recent building approval figures, with public investment also seeing a slight moderation. The Aussie Dollar moved from $0.76337 to $0.76605 upon release of the figures, before rising to $0.7668 at the time of writing, up 0.62% for the session. Elsewhere, the Japanese Yen was down 0.13% to ¥109.93, positive stats out of the U.S and general sentiment towards economic growth overshadowing concerns over geo-political risk in the Eurozone and trade war jitters through the morning. In the equity markets, the Hang Seng and ASX200 were up 0.48% and by 0.51% respectively at the time of writing, while the CSI300 was down 0.25%. The Nikkei found support from the softer Yen and the pickup in the NASDAQ overnight, up 0.4% ahead of the close. For the EUR, there are no material stats scheduled for release through the morning, leaving focus on politics and monetary policy, following reports of the ECB planning to discuss an exit from the QE program next week driving strong support that led the EUR’s gains on Tuesday, which came in spite of jitters over populist policy being rolled out in Italy. At the time of writing, the EUR was up 0.04% to $1.1723, with sentiment towards Friday’s G7 another factor for the markets to consider, any signs of a trade war pulling the EU in likely to temper any hawkish moves by the ECB. For the Pound, there are no material stats scheduled for release through the day, with sentiment towards BoE monetary policy flip flopping once more following the improved private sector PMI numbers in May, which joined a strong set of retail sales numbers for April, supporting Carney’s view that 1st quarter economic weakness would be temporary. While the markets look on to the Italian coalition government and its announced populist fiscal reforms, Brexit will also be a factor through the week, though with the G7 ahead on Friday, the noise may be on the quieter side.
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FINANCIAL MARKET REVIEW FOR JUN 06, 2018
At the time of writing, the Pound was up 0.15% to $1.3413, with possible direction through the day coming from MPC members McCafferty and Tenreyro, who are scheduled to speak. In the US, economic data scheduled for release out of the U.S includes April’s trade figures, together with 1st quarter unit labour cost and productivity figures. While we will expect the 1st quarter unit labour cost and productivity figures to provide direction should there be any deviation from prelim figures, the trade numbers will likely garner plenty of attention ahead of this week’s G7 that should deliver quite a storm as world leaders look to stave off a trade war. At the time of writing, the Dear DollarMr.Benitez, Spot Index was down 0.05% to 93.826, with today’s stats and the Oval Office in focus, while the markets will also consider the FED’s likely stance on policy as economic data elsewhere suggests a reversal in recent monetary policy divergence that had favoured the Greenback. Finally in Canada, the Loonie is in action, with April trade and building permit numbers, together with May’s Ivey PMI scheduled for release. While we will expect the data, particularly trade, to have an impact, further chatter on Canada receiving an exemption from steel import tariffs would certainly provide support for the Loonie. The Loonie was up 0.29% to C$1.2933 at the time of writing. View our full economic calendar for a daily roundup of major economic events.
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