HotForex Forex News

09:28 USD/CAD clings to strong gains at fresh yearly tops

The USD/CAD pair extended previous session's sharp recovery move from the 1.3400 neighborhood and spiked to the highest level since Dec. 28, around 1.3560 region.

Spot continued scaling higher and built on to its break-out momentum beyond the key 1.35 psychological mark. The Canadian Dollar is being weighed down by overnight news that the US President Donald Trump plans to impose 20% tariff on soft lumber imports from Canada. 

   •  Trump's administration plans to impose 20% tariff on Canadian soft lumber imports - DJ

Adding to this, the prevalent bearish sentiment surrounding oil markets, with WTI crude oil struggling to register any meaningful recovery after six consecutive days of losses, has failed to extend any support to the commodity-linked currency - Loonie, and stall the pair's ongoing up-surge to yearly tops. 

Meanwhile, a modest US Dollar up-tick, against the backdrop of expected tax cut plans by the Trump administration, further collaborated to the strong bid tone surrounding the major. 

   •  US: Trump administration risking its reputation - AmpGFX

Traders now look forward to the US economic docket, featuring the release of CB Consumer Confidence Index and new home sales data for some fresh impetus. 

Technical levels to watch

From current levels, 1.3575-80 area is likely to act as immediate resistance, above which the pair is likely to surpass the 1.3600 handle and aim towards testing its next major hurdle near 1.3640-45 region. 

On the downside, retracement back below 1.3525-20 immediate support now seems to find support near the 1.35 handle, which is closely followed by a strong horizontal support near 1.3465 level.


09:28 Trump remains focused on shoring up the true-believers - AmpGFX

In view of the analysts at Amplifying Global FX Capital, it appears that Trump is concentrating on shoring up support from his voter base with tweets as the polls show that his overall net approval rating is down and relatively low compared to past administrations at this stage of his presidency. 

Key Quotes

“However, he never started with a high net approval rating after a divisive election in which he lost the popular vote, and he has never been able to build support from those that voted against him in the election that are turned off by his moves on immigration, border security and climate policy.”

“His strategy is to keep support from his conservative voter base – mentions of beating Hillary this far into the administration, attempts to lay blame for Healthcare on Democrats, persisting with Mexico paying for a wall – are for consumption by his true-believers. The news polls did show that most of those that voted for him in the last election still supported him.”

“Further in this theme, Trump is to address the National Rifle Association Institute for Legislative Action (NRA-ILA) convention on Friday.  He will be the first President to do so Since Ronald Regan.”

“This is also apparent in his posturing around bringing back jobs for coal mining, steel, and manufacturing.  These issues appear more important to Trump that passage of bills in Congress.”


09:22 OPECs Barkindo: Conformity to OPEC output cut deal stood at 94% in February

Secretary General of the Organization of Petroleum Exporting Countries (OPEC), Mohammed Barkindo, said in his keynote speech at the 3rd GCC Petroleum Media Forum held earlier on the day that the OPEC and non-OPEC compliance to the oil output cut deal stood at 94% in February.

Key Quotes:

“For the month of February, conformity to the adjustment stood at 94%, which was eight percentage points above the January figure - already, in itself, impressive” 

Barkindo thanked HE Suhail Mohamed Al Mazrouei, the UAE’s Minister of Energy, “for his skillful, persuasive and constructive engagements during the intensive negotiations” that paved the way for last year’s historic decisions, as reported by Daily Trust.


09:22 RBA: Next move largely depends on the outlook for wages - HSBC

In view of the analysts at HSBC, the RBA’s next move largely depends on the outlook for wages but the measurement issues and the changing relationship between the labour market and wages are complicating the outlook.

Key Quotes

“For an inflation-targeting central bank, wages growth matters. Indeed, the two key empirical models that the RBA uses for forecasting inflation both have wages and the labour market as key inputs. The first is a ‘Phillips’ curve’ model, which suggests that as the unemployment rate falls, and spare capacity in the labour market is reduced, wages and inflation rise, as workers are able to demand greater pay. Second is the ‘mark-up’ model which suggests that prices are set as a mark-up over costs. In this model, unit labour costs (productivity-adjusted wages growth) are a key input.”

“However, structural change in the labour market and measurement issues are making these relationships more complicated. In particular, the measures of wages growth, which are at their lowest levels in multiple decades, are much lower than the historical relationship with the unemployment rate would imply.”

“There are many possible explanations. It could reflect underemployment, with the broader measures of spare capacity less positive than the headline unemployment rate. This could reflect a shift to more part-time jobs, reducing the bargaining power of workers. It could be the result of technology, globalisation and structural factors, which are making it harder for workers to demand wage rises. Another factor may be that the very large cycle in commodity prices and national income in recent years has affected wage settings. Importantly, measurement issues in the official labour market statistics have been further complicating any assessment. Job vacancy, job advertisements and business surveys all show stronger labour market conditions than the official statistics.”

“We see the RBA as unlikely to cut interest rates any further, given concerns about the housing price and credit boom in Sydney and Melbourne. With no cuts likely, the key question is: When might the RBA start to lift the cash rate? For this to happen we believe the central bank would need to be convinced that wages growth is picking up. There is considerable uncertainty about when this will happen. However, our view is that the recent lift in commodity prices, and the boost it has delivered to national income, should deliver some support for wages growth. History shows a strong positive correlation between Australia’s wages growth and commodity prices.”


09:18 Euro defines the dollar s peak SocGen

According to Kit Juckes, Research Analyst at Societe Generale, the euro isn't as important for the dollar's overall trade-weighted value as it is for, say, the DXY index, but it still matters.

Key Quotes

“Away from political uncertainty, it's clear that the euro area economy is improving. The ECB will be under increasing pressure to remove monetary accommodation after the French elections, and the focus will surely switch back towards the EU/US investment imbalance, which is now the biggest imbalance in the global economy.”

“Whether President Trump increases pressure on FX policy remains to be seen, but we very much doubt that European investors can go on recycling the current account surplus as easily in the coming months as they have in the last year. Any slowdown in the pace of European investors' buying of foreign assets will place upward pressure on the euro and probably guarantee that even in broad trade-weighted terms, the dollar has already peaked.”

“The cycle low in EUR/USD is behind us and the risk of a spike higher is growing.”


09:14 US: Trump administration risking its reputation - AmpGFX

The research team at Amplifying Global FX Capital points out that many are scratching their heads as to why Trump is trying to do so much this week as he may be over-burdening Congress by pushing for passage of a healthcare bill to repeal and replace Obamacare and releasing tax cuts plans in the same week as the deadline for a funding bill. 

Key Quotes

“If divisions over the healthcare and tax policy are brought to the foreground, it may limit the ability of Congress to make compromises necessary to pass the funding bill.  Trump is likely to take the blame if the funding bill fails to pass.”

“Furthermore, Trump has indicated that he wants some funds in the new funding bill for the Mexican border wall.  Democrats are unlikely to support any bill that directly funds the wall.”

“Republicans have a majority in both houses of Congress.  However, the Democrats have enough seats in the Senate to force a filibuster on the funding bill, preventing it being called to a vote.  41 seats in the 100 seat Senate are all that is required to prevent a vote on bills.”

“The Republicans invoked the so-called nuclear option to force a vote on the confirmation on Gorsuch to the Supreme Court, but it would be much more controversial and essentially out of the question to do so on legislative bills, including funding bills, especially on the first try.”

“As such, Trump and the Republican Party still need some Democratic support to pass funding bills.  The same is true for all bills; including those required for the passage of tax reform and healthcare. And Democrats could hold the government hostage over funding bills or raising the debt ceiling; in the same way that Republicans essentially did at times during the Obama administration.”

“The Democrats might not want to be blamed for government shutdowns or market disruption, and thus will tend towards voting for funding bills, but only if they do not include significant and controversial policies.  The Mexican border wall is likely to be a sticking point.  It is possible that Congress could navigate around this issue by providing a modest increase in funding for border security.”

“Trump may also be damaging the possibility of easy passage of bills this week by resuming his antagonizing Twitter feed.  He tweeted again that “Mexico will be paying, in some form, for the badly needed border wall.” But suggested that he wants funding to start the wall this week.”

“He also commented on the reporting on opinion polls calling “much of the media” fake and he “Would still beat Hillary in a popular vote” (He lost the popular vote?).  And jabbing at Democrats with “ObamaCare is in serious trouble.  The Dems need big money to keep it going – otherwise it dies far sooner that anyone thought.”

“Democrats are less likely to support a funding bill if Trump is politicizing these contentious issues (border wall and Healthcare).”


09:09 ECB s Bank Lending Survey in focus today Danske Bank

The research team at Danske Bank points out that the ECB's Bank Lending Survey is due for release today and will be the key economic release for the day.

Key Quotes

“The latest report from January showed that loan growth continued to be supported by increasing demand across all loan categories, while credit standards (i.e. banks' internal guidelines or loan approval criteria) for loans to enterprises tightened somewhat in net terms due to banks' lower willingness to tolerate risk.”

Rate decision in Hungary. We expect the National Bank of Hungary (NBH) to keep its base rate unchanged at 0.9% today. The inflation rate rose to 2.9% y/y in February, near the central bank target of 3%. However, the rise in inflation so far is driven mainly by a base effect of energy prices, and thus no imminent pressure for higher interest rates.”


09:06 US: Reflation needs a reboot - SocGen

In view of Kit Juckes, Research Analyst at Societe Generale, faltering US inflation expectations have emboldened the market to mark down its expectations of the Fed rate path and this has robbed the dollar of yield support.

Key Quotes

“As base effects from last year's rise in energy prices start to fade, the pull they had on inflation is ending, leaving behind a growing sense of 'Meh'! Tight labour markets don't deliver faster wage growth and soft real wages don't deliver any kind of additional kicker to economic recovery. With the Federal Reserve looking more like a dove than a hawk, let alone a leopard that has changed its spots or grown some teeth, the dollar rally has fizzled out.”

“With Donald Trump's chances of delivering significant fiscal stimulus now lessened, the pressure on the Fed to be at all aggressive is further reduced. The result is that a slower path of rate increases delivers a later and probably lower peak in real rates and real yields, which in turn means a significantly lower peak in relative real yields and a lower peak for the dollar. And it gives me the heebie-jeebies that if the only lesson the Fed has learnt from 2008 is the need to have better-capitalised and regulated banks and not the need to avoid over-stimulating asset prices, then we are less able to avoid the next crisis.”


09:03 Forex Today: CAD slips on US import tariffs news, US data on sight

Amid holiday-thinned Asian trading, headlines surrounding the Trump administration dominated markets, as French election risks faded. The CAD was heavily sold into reports of the US planning a 20% tariff imposition on the Canadian soft lumber imports, while the yen also remained heavy amid an extension of the rally in the Japanese stocks and on headlines that Trump is willing to delay the US-Mexico border push.

Meanwhile, the greenback picked-up strength in Asia against most of its major peers, while EUR/USD traded largely subdued in a tight range.

Heading into Europe, focus remains on the UK’s public sector net borrowing data, which is expected to fill in an otherwise light EUR calendar. Later in the NA session, a slew of US economic releases are due on the cards, with the CB consumer confidence and new home sales data to be closely eyed for fresh USD moves.

Main topics in Asia

Trump's administration plans to impose 20% tariff on Canadian soft lumber imports - DJ

According to Dow Jones, U.S. President Trump's administration plans to impose 20% tariff on Canadian soft lumber imports.

Kantar Poll: Scots don't want another independence vote - RTRS

According to a Kantar survey, most Scottish voters do not want another referendum on independence from the UK and support for secession itself appears to have weakened, Reuters reports.

Canadian ministers Freeland & Carr condemn unfair, punitive duties on lumber

Canadian Foreign Minister Chrystia Freeland alongside Minister of Natural Resources Jim Carr crossed the wires last minutes, via Reuters, responding to the Trump administration’s plans to impose 20% tariff on the Canadian soft lumber imports.

Trump willing to delay border wall push - Politico

At reception with conservative media, the US President Trump noted that he would delay a fight over a wall at the US-Mexico border until September to avert a government shutdown, Politico reports.

North Korea stages firing drill marking military anniversary – Yonhap

Yonhap, South Korea's largest news agency, quoted a North Korean government source citing that North Korea staged what it appears to be the largest firing drill on Tuesday to mark the 85tth founding anniversary of its military.

Key Focus ahead

EUR/USD side-lined near 1.0870, awaits fresh impetus

A calm has spread across the EUR markets on Tuesday, as the bulls continue to consolidate yesterday’s massive rally, keeping EUR/USD largely flat-lined in the familiar range near 1.0865/70 region.

USD/CAD sits at fresh 2017 tops, what next?

The US dollar paused its bullish run against its Canadian counterpart over the last hours, sending USD/CAD in a phase of upside consolidations near four-month highs reached at 1.3560.

US data previewed: start of a busy week - Nomura

Analysts at Nomura offered a preview of the start of this week's busy US data schedule.

Australia's Q1 2017 CPI preview - NAB

National Australian Bank (NAB) is out with a brief preview on the upcoming Australian Q1 CPI report, scheduled for release tomorrow at 0130GMT.

 


09:02 EUR/GBP once again fails to break through 0.85 mark

The EUR/GBP cross struggled to build on the French election-led bullish gap and now seems to have entered a consolidation phase just below the key 0.85 psychological mark.

Currently trading around 0.8490-85 band, testing session lows, the cross eroded part of previous session's strong up-surge and traded with mild bearish bias amid lack of follow through buying interest around the shared currency, despite of market friendly outcome from the first round of French Presidential election. 

French Elections: Odds of Marine Le Pen wining the second round are very low – Deutsche Bank

Meanwhile, sentiment surrounding the British Pound remains buoyed in wake of last week's announcement by the UK PM Theresa May calling for a snap election on June 8th and is eventually collaborating towards capping further up-move for the cross, at least for the time being.

In absence of any fresh fundamental triggers, in-terms of any major market moving economic releases, any fresh political news would continue to act as an exclusive driver of the pair’s movement on Tuesday.

Technical levels to watch

Immediate support is pegged near 0.8450 area, which if broken is likely to extend the corrective slide towards 0.8415-10 intermediate support ahead of 0.8380 level. On the upside, bulls would be eyeing for a sustained move beyond the 0.8500 handle, above which the cross is likely to aim towards 0.8540-45 resistance en-route 0.8570 resistance.


09:01 US Dollar up smalls around 99.00

The greenback, when measured by the US Dollar Index, is posting marginal gains on Tuesday, currently gyrating around the 99.0 handle.

US Dollar clings to 99.00

The index is navigating the area of recent lows recorded post-Macron win at the French elections on Sunday, always amidst a generalized risk-on sentiment although trading somewhat firmer so far today.

The area remains critical for DXY, as both the key 200-day sma and the 11-month support line are located around current levels.

In the US data space, house prices tracked by the S&P/Case-Shiller index are due along with New Home Sales and the key Consumer Confidence gauges by the Conference Board.

It is worth mentioning that USD stays under pressure from the speculative community, as net longs have retreated to 2-week lows in the week to April 18, according to the latest CFTC report.

US Dollar relevant levels

The index is up 0.10% at 99.01 and a break above 99.24 (high Apr.24) would aim for 100.04 (38.2% Fibo of the March drop) and finally 100.12 (20-day sma). On the flip side, the next support aligns at 98.82 (11-month support line) seconded by 98.70 (low Apr.24) and then 98.67 (2017 low Mar.27).

 


08:50 IMFs Obstfeld: Too early for the ECB to exit stimulus B.Z.

Maurice Obstfeld, the Economic Counsellor and Director of Research at the International Monetary Fund (IMF), said in an interview with a German news agency – B.Z., it’s too early for the ECB to exit its massive stimulus program.


08:49 Selectively constructive on EM assets Goldman Sachs

Ian Tomb, Research Analyst at Goldman Sachs, explains that the broader global environment supports a selectively constructive view on EM assets. 

Key Quotes

“Specifically:

  • As the market continues to scrutinise the gap between ‘soft’ and ‘hard’ data, it is worth noting that some of the most encouraging global ‘hard’ data have been global trade flows, to which EM is highly exposed.
  • While a number of key DMs feature near potential growth, many (ex-China) EMs are growing below potential and, conditional on a supportive environment, appear primed for a continued growth recovery.  In a similar vein, our portfolio strategy team has highlighted the possibility that, relative to DM, EM growth and equity performance may have hit an inflection point – with the potential for EM outperformance ahead.
  • While fundamental issues in the Chinese economy are a longer-run concern for EM, a run of strong March data, including activity data, together with incentives for maintaining macroeconomic stability before the 19th Party Congress in the autumn, have helped allay concerns of imminent China downside risk.”

“If global ‘hard’ data improve in 2017Q2, and the VIX index stays anchored, EM could be somewhat insulated from a moderate and controlled US-specific shock.  Moreover, we think an encouraging EM growth story would likely support EM credit and equity and, in FX, the high carry on offer in ‘good carry’ candidates in EM currencies can be effectively expressed via relative trades.”


08:26 ECB s Nowotny: US economy could be without orientation for a while

In an interview to Der Standard, an Austrian national daily, ECB's Nowotny said that uncertainties over US measures are worrying and that the US economy could be without orientation for a while. If the US expands deficit to boost growth it could lead to higher long-term interest rates in Europe. 

Talking about Breixt, Nowotny was noted saying that Brexit has been underestimated and many negative surprises could arise. He, however, does not expect extension of negotiation time frame.

He further added that EU financial institutions wanting to operate in EU must have seat, supervision in EU.


08:18 EUR/USD side-lined near 1.0870, awaits fresh impetus

A calm has spread across the EUR markets on Tuesday, as the bulls continue to consolidate yesterday’s massive rally, keeping EUR/USD largely flat-lined in the familiar range near 1.0865/70 region.

The spot is seen gathering pace for next leg higher, as the political uncertainty around the French election fades and attention turns towards the US tax reform plans announcement due tomorrow by the US President Trump.

Markets believe that Wednesday’s US tax reforms announcement is likely to lack details on yet another occasion, which could be used as an excuse to sell-off USD longs.

Moreover, renewed concerns over the North Korean issue combined with increased odds of a Macron win in the French would continue to keep the sentiment buoyed around the common currency.

Markets now brace for the ECB policy decision due this Thursday, with hints on a QE taper likely to provide extra legs to the recent bullish tone in EUR/USD. In the meantime, the US consumer confidence and new home sales data due today will be eyed for some fresh cues.

EUR/USD Technical Levels

Technical resistances for the pair are aligned at 1.0900/20 (round number/ multi-month tops), 1.0946/50 (Fib R2/ psychological levels) and finally 1.1000 (key resistance). On the flip side, the spot finds next support at 1.0811 (5-DMA), a break below that level could open the door to 1.0757 (classic S2/ Fib S3) and 1.0736 (10-DMA).


08:18 French Elections: Odds of Marine Le Pen wining the second round are very low Deutsche Bank

The analysis team at Deutsche Bank suggests that the odds of Marine Le Pen wining the second round of French elections are very low assuming a normal scenario.

Key Quotes

“Under abnormal circumstances, she still has a chance though it is declining rapidly driven by lower voter support in the second round. Her likely target will be Melenchon’s supporter to avoid damaging her party for the June election. In essence, the battle has already shifted there.”

“Emmanuel Macron shows no clear vulnerability for the second round. Marine Le Pen has generally retreated after some significant inroads, though she is holding on to gains for example in rural areas and within the public sector. Her platform remains geared to a population that is below high school level and in some cases dependent on social outlays and her victory speech did not deviate from that line. She has hit a glass ceiling repeatedly, has had difficulties with her campaign as she slid in the polls while her unconventional remarks did not help her. Going forward, she may rebound by moderating her message to widen her appeal, but it might hinder the chances of her party in the June parliamentary election making it a difficult risk to reward exercise. Targeting Jean-Luc Melenchon’s supporters might be a less damaging alternative. 12 to 22% would vote for her while 23 to 37% would vote blank (source IFOP and Opinionway).”

“Emmanuel Macron will need to motivate disenfranchised voters on the left and right to come and vote for him. The opinionway poll showed a sharp drop of 3% from 64 to 61% with the bitter after effect of the first round poll fresh in the minds. This effect should fade in the coming days. Monitoring attendance in the second round is going to be of some importance.”

“Note that Opinionway releases first to second round vote transitions including those of Dupont Aignan. These are surprisingly far more in favor of Emmanuel Macron than one would have expected. Even more importantly, first round blank voters would vote 20% Marine Le Pen 33% Emmanuel Macron and 47% Blank.”


08:11 Australia CPI: Underlying inflation to lift to 1.9%/yr - TDS

Analysts at TDS are on the hawkish side of tomorrow’s Q1 CPI report for Australia and are looking for underlying inflation to lift to 1.9%/yr, a pip higher than consensus’ 1.8%/yr.

Key Quotes

“We doubt that such a marginal upside surprise will have lasting impact on the markets as that outcome remains consistent with the RBA’s 2% projection by mid-year.”

“OIS late yesterday (markets closed today) was pricing a 15% chance of a cut by August, before grinding higher to 50/50 for +25bp by Q3 2018. Consensus expects the RBA to hold at 1.5% through to 2018.”

“AUD at $US0.756 is marking time through the holiday today and awaiting tomorrow’s report for direction. Next week brings the RBA duo of the Board meeting and the quarterly Statement on Monetary Policy.”


08:08 NZD/USD extends previous sessions rejection move from 50-DMA

The NZD/USD pair extended previous session's reversal move from the 50-day SMA hurdle and has now slipped below the key 0.70 psychological mark.

On Monday, the pair failed to build on French election-led weekly bullish gap and faced some fresh supply at higher levels. A follow through recovery in the US treasury bond yields, led by renewed optimism over the US President Donald Trump's tax cut plans, helped the US Dollar Index to recover back above 99.00 mark and was seen weighing on higher-yielding currencies - like the Kiwi. 

From a technical perspective, the pair is currently placed closer to its immediate support near 0.6980 level and hence, a follow through selling pressure would confirm a rejection from 50-day SMA resistance, eventually turning the pair vulnerable to extend its depreciating move in the near-term.

On the economic data front, today's release of CB Consumer Confidence Index and new home sales data from the US would now be looked upon for some fresh impetus during early NA session.

Technical levels to watch

On a sustained break below 0.6980 level, the pair is likely to accelerate the downslide towards 0.6955 horizontal support before heading towards its next support near 0.6920-15 zone. 

Meanwhile on the upside, any recovery attempts back above 0.70-0.7010 area could boost the pair towards 50-day SMA strong resistance near mid-0.7000s, which if conquered might trigger a short-covering rally towards 0.7075 region (100-day SMA) ahead of the 0.7100 handle.


07:54 US: Government funding bill a test, debt-ceiling looms later in the year - AmpGFX

In view of the analysts at Amplifying Global FX Capital, the White House has high ambitions for this week as it would like to pass a government funding bill that is required by 29 April to prevent a so-called government shutdown and hopes to pass new Healthcare legislation (to repeal and replace Obamacare), and Trump has said his team will announce its tax reform plans on Wednesday.

Key Quotes

“28 April is the expiration date for the current Continuing Resolution bill (passed on 9 December 2016). This extended funding from the previous continuing resolution (passed on 28 September).”

“The US Congress did not pass a full-year Appropriations bill for the current fiscal year that began 1 October.  It is running on short-term continuing resolutions.  It needs to pass another bill to keep funding government spending, presumably an Appropriations bill that will run through to October.”

“A failure to pass a new appropriations bill or roll-over into a new continuing resolution will start the government shut-down process, risking disruption of government services.”

“However, this is not as severe for markets as the other kind of government shut-down that follows hitting the debt ceiling. The debt ceiling has resulted in significant investor risk aversion; the most severe occurred in 2011.”

“The Debt limit was reintroduced on 15 March this year (after it was last suspended in 2015).  As such, the US Treasury is already restricted from issuing net new debt, and is running on so-called extraordinary measures.  Using these measures, the government is expected to be able to fund normal spending until October or November.”

“If Congress does not raise the limit by October, the market may become nervous that the USA is flirting with defaulting on its government debt.  Once its extraordinary measures run out, the government can only spend revenue that comes in, and some of that must go to interest payments to avoid a default.  So another kind of government shut-down that is more problematic for markets could ensue if Congress does not agree to raise the debt limit before then.”

“Nevertheless, the funding bill this week is an important test for the Trump administration.  A period of disruption to government services would make government appear dysfunctional and reduce confidence it can achieve meaningful reform, including tax reform and infrastructure spending promised by the Trump administration. A prolonged disruption to government spending would also directly dampen consumer and business confidence in the economy.”

“A delayed funding bill this week would also increase worry that government may not be able to smoothly navigate the debt ceiling problem that looms in October. Not only will the debt ceiling problem come to a head in October, Congress is also likely to be negotiating another funding bill to allow the government to operate from the beginning of the next fiscal year, and the debate over the Trump tax plan and long-term budget plans should be in full swing.  The combination could significantly undermine investor confidence.”


07:52 Iraq March crude oil production up 4% - Iraq Oil Report

According to the analysis of field-by-field data gathered by Iraq Oil Report, Iraq’s March crude oil production rose 4% to 4.586 million barrels per day, Livesquawk reports.

 


07:44 Singapore auction preview (26 April): SGS 20Y (Reopen) - ANZ

Irene Cheung, Research Analyst at ANZ, points out that the MAS will sell SGD0.8bn 20Y (reopen) SGS (via mini-auction) on Wednesday, 26 April and the demand at this auction will be primarily from onshore buy-to-hold institutional investors.

Key Quotes

“The external environment has turned more supportive to the SGS market. After the US Federal Reserve signalled at the March FOMC meeting that it would stick to a gradual tightening path, President Trump said that he preferred low interest rates. With US data also showing some softness lately, external headwinds will likely be less of a drag for SGS in the near term even though we expect the Fed to be on track to hike another two times this year.”

“On the domestic front, easy liquidity conditions will also be supportive. While foreign participation in long dated SGS is limited, a less vulnerable SGD will also aid sentiment. The MAS maintained a neutral S$NEER policy at its policy review on 13 April.”

“The issuance size of USD0.8bn should be absorbed but note that there will be more supply of duration in the scheduled 30Y auction in May.”


07:41 BOJ likely to keep policy steady on Thursday - Nomura

Analysts at Nomura provide a sneak peek on what to expect from the BOJ monetary policy review meeting scheduled this Thursday.

Headlines:

BOJ policy unchanged

The BOJ will welcome the yen depreciation since French election 1st round result


07:37 GBP/USD placed at the lower end of 5-day old trading range

The GBP/USD pair prolonged its consolidative price action and is currently placed closer to the lower band of its five-day old trading range, near 1.2775 level. 

The pair traded with mild bearish bias for the third consecutive session and continued with its struggle to build on previous week's strong up-surge led by the UK PM Theresa May's announcement to call for a snap election on June 8th.

A modest greenback recovery, with the key US Dollar Index moving back above the 99.00 handle, seems to be only factor weighing on the major. Renewed optimism over the US President Donald Trump's pro-growth economic policies now seems to be extending some immediate support for the buck. Hence, investors now wait to hear more about Trump's "massive tax cut" plans, which he said is coming this week. 

Today's economic docket features the release of UK Public Sector Net Borrowing, while from the US Conference Board's Consumer Confidence Index would grab the spotlight later during NA session. Apart from consumer confidence data, the release of House Price Index (HPI), New Home Sales and Richmond Manufacturing Index would also be looked upon for some short-term trading impetus. 

   •  What's the outlook for the US economy? - Nomura

Technical levels to watch

On a sustained break below 1.2775-70 support, leading to a subsequent break below mid-1.2700s, would turn the pair vulnerable to aim back towards 1.2710-1.2700 support area. On the flip side, momentum back above the 1.2800 handle might continue to confront resistance near 1.2835-40 resistance area, above which a fresh bout of buying interest is likely to lift the pair back towards reclaiming the 1.2900 handle with some intermediate resistance near 1.2870-75 zone.


07:33 Political risk ebbs in Europe, rises in the US - AmpGFX

Analysts at Amplifying Global FX Capital explain that much of the risk premium related to the French election has been unwound contributing to a surge in European asset prices as the EUR is higher, but has stalled around the previous peaks set after the less dovish than expected 9 March ECB meeting. 

Key Quotes

“The rally in EUR still appears modest compared to other Eurozone assets.  European economic surveys have continued to rise in April to their highs since around 2011, despite French election uncertainty. Global growth indicators have also strengthened further.  Expectations of any change in policy guidance have been dampened by ECB comments in recent weeks, but it is under pressure to remove its downside bias on economic risks and interest rates in its policy statement and press conference on Thursday.”

“Trump may have bitten off more than he can chew this week with a tough road to pass a funding bill complicated by his pressure for including funding for a border wall, passage of a Healthcare bill, and announcing tax policy.  Trump appears more focused on shoring up support from his true believers than passing bills.  He may be pushing ahead with pursuing tougher trade deals; including tariffs on steel imports, fueling fears of trade wars, while confidence in his ability to deliver tax reform or infrastructure spending may be fading.  Passage of a funding bill this week may be crucial for maintaining economic confidence in the USA.  Failure will bring into question the government’s capacity to deal with the debt ceiling, delivering tax reform and tough budget negotiations ahead of the next fiscal year in October.”

“EUR may not only benefit from less political risk in Europe, but rising political risk in the US and a potential flare-up in geopolitical risk, such as heighten risk of a US conflict with North Korea.”


07:22 Trump looks to Australia for infrastructure guide - BBG

Steven Roth, co-chairman of the US president Trump’s infrastructure task force, said at a Bloomberg panel discussion in New York late-Monday, Trump seeks inspiration from Australia for his planned $1 trillion infrastructure program.

Key Quotes:

The Trump administration is looking “very carefully” at Australia’s model for financing roads, bridges and other public projects

“The gospel is that the government sets goals, and is bureaucratic.”

“The private sector is entrepreneurial and more efficient. The process is improved by switching over from government-managed to private-managed as early as possible.”


07:04 USD/CAD sits at fresh 2017 tops, what next?

The US dollar paused its bullish run against its Canadian counterpart over the last hours, sending USD/CAD in a phase of upside consolidations near four-month highs reached at 1.3560.

The spot rallied hard in Asia, after the bulls found renewed bids near 1.35 heads in the overnight trades. The Canadian dollar witnessed aggressive selling amid reports that the Trump administration plans to impose 20% tariff on soft lumber imports from Canada. Such a move by the Trump administration will hamper trade relations between both the North American economies.

Moreover, fresh bid-wave that caught the greenback across the board also aided the latest leg higher in the major. However, further upside appears capped as oil prices have started to recovery after the previous drop, offering some respite to the CAD bulls.

Focus shifts towards the fundamentals now for fresh impetus on the prices, with the US CB consumer confidence and new home sales data due on the cards.

USD/CAD Technical levels                

Analysts at Brown Brothers Harriman offered their technical outlook, “The technical indicators point to additional US dollar strength, with CAD1.36 being the next obvious target. In addition to corresponding to the highs from Q4 16, it is also the 50% retracement objective of the US dollar slide from the January 16 high near CAD1.4700.  The greenback's sharp advance is forcing the Bollinger Band to widen. The upper band is found near CAD1.3500.”


06:43 North Korea stages firing drill marking military anniversary Yonhap

Yonhap, South Korea's largest news agency, quoted a North Korean government source citing that North Korea staged what it appears to be the largest firing drill on Tuesday to mark the 85tth founding anniversary of its military.

The source added, N. Korea has conducted the drill around the eastern port city of Wonsan.


06:30 China Press: China set to give approval for mixed-ownership reform trials at SOEs soon

Economic Information Daily, China’s newspaper quoted comments from unidentified official at state assets manager, State-owned Assets Supervision and Administration Commission of the State Council (SASAC).

Main headlines via Bloomberg:

China is set to give go-ahead for mixed-ownership reform trials at centrally administered state-owned enterprises (SOEs) soon

Focus will be on key sectors with monopolies: electricity, oil, gas, railway, civil aviation, telecoms, defense


06:21 Brent Oil: Long-term bearish trend reversal?

Brent Oil dropped on Monday after the prices breached the rising trend line (drawn from Feb 2016 low and Nov 2016 low) support on Friday. 

As of writing, Brent was trading at $52.40/barrel; up 27 cents or 0.52%. Prices dropped for the sixth straight session on Monday. 

Oil operating on the slippery floors

The failure at the trend line resistance goes well with the fact that the fundamentals and sentiment remains weak. Moreover, it is ingrained in the minds of the traders that a barrel taken off by the OPEC ends up funding Shale producers. 

Thus, OPEC’s efforts to support prices by cutting output fail to have a long lasting effect on the prices. 

There is more evidence that investors are losing confidence in the oil rally. Hedge funds have slowed their net-long builds, a sign of waning confidence in higher oil prices. 

As of now, fundamental and technical factors are pointing to a major bearish trend reversal. The only factor that could boost prices is a sudden drop in the US inventories and/or rise in geopolitical tensions. 

 


06:00 BOJs Iwata: BOJ simulating exit internally, but too early to discuss externally

Bank of Japan (BOJ) Deputy Governor Kikuo Iwata crossed the wires last minutes, making a scheduled speech in parliament.

Key Headlines:

BOJ simulating exit internally, but too early to discuss externally

Withholding from publicizing it as doing so would cause market confusion


05:57 USD/JPY rebounds sharply in tandem with Nikkei, above 110.00

The bulls made a solid comeback in mid-Asia, lifting the USD/JPY pair from near 109.60 region to now inch closer towards 200-DMA located at 110.26.

The USD/JPY pair took a sharp U-turn after risk appetite got a further boost from a renewed buying wave caught by the Japanese stocks, while broad based US dollar buying also helped the rate to take-off beyond 110 levels.

The USD index rises +0.15% to flirt with session tops reached at 99.10, while the Nikkei 225 index rallies 1% to 19,061, extending the previous rebound.

However, it remains to be seen if the spot can sustain the recovery, as the uncertainty over Trump’s tax reform plans continue to keep the US yields unmotivated. Moreover, expectations that the BOJ will continue easy money policy until 2% price target is achieved, also adds to the bullish tone in USD/JPY.

Meanwhile, markets shrugged-off upbeat Japanese PPI figures, as focus shifts towards the US datasets due later in the NA session.

USD/JPY Technical levels                 

A break above 110.50/55 (psychological levels/ 9-day high) would expose 110.97 (Apr 11 high) and 111.47/58 (Apr 5 & 10 high). On the other hand, a breach of support at 109.62/60 (daily low/ rising trend line support) could yield a test of 109.15/109 (10-DMA/ round figure) and 108.85 (Apr 21 low).  


05:50 EUR/USD - Political risks fade; focus shifts to the ECB

EUR/USD clocked a high of 1.0918, but failed to close above August 8 high of 1.0873 levels despite French election relief.

Risk-on triggered by unwinding of hedges

The rally in the EUR and other risk assets on Monday was more due to unwinding of hedges initiated ahead of French elections on fears of Le Pen-Melenchon scenario.

The election is no longer a risk not because Macron came out victorious in the first round, but due to the fact that the polls show Macron is set to win the second round by a big margin. What that means is the anti-EU candidate Marine Le Pen has huge ground to cover, which looks less likely.

Focus on ECB

Market relief after the French vote should see the attention squarely turn to ECB policy. With political risks fading, the speculation of ECB announcing a QE Taper this year is likely to gather pace. That could keep the EUR well bid, especially against currencies except USD. The American Dollar may remain resilient on account of the rally in the treasury yields on Monday.

What’s next for the EUR?

The common currency may rally across the board if the ECB sounds optimistic about the Eurozone growth and inflation trajectory and provides hints of a potential QE Taper this year.

The ECB rate decision is due this Thursday. As for today, the data calendar is light in Europe. US consumer confidence and housing data could influence the dollar side of the story.

EUR/USD Technical Levels

The spot was last seen trading around 1.0860. A break above 1.0873 (Dec 8 high) would open doors for a re-test of 1.0906 (Mar 27 high) and 1.0918 (previous day’s high). On the other hand, a breakdown of support at 1.0829 (Feb 2 low) could yield a sell-off to 1.0775 (5-DMA) and 1.0738 (Apr 21 high).

 

 


05:17 US preparing to evacuate 230,000 Americans from South Korea

The US military sources revealed that as a part of a drill named Courageous Channel due to be held in June, the US President Trump has demanded the evacuation of US citizens from South Korea, a UK tabloid reports.

In response to this, South Korean joint chief of staff said that the country hasn't seen any North Korean provocation so far.

Key Points:

The US prepares for the safe exit of around 230,000 Americans in the case of conflict.

If the Pyongyang was to attack, tens of thousands of American civilians, including military dependents residing in and around the capital city of Seoul, could very well be caught in the crossfire.

 


05:07 AUD/JPY retakes 83.00 handles, supported by 4-hour 100-MA

Yen weakness in Asia pushed the AUD/JPY pair to a session high of 83.14 levels amid holiday thinned trade. 

The retreat from the Monday’s session high of 83.85 appears to have run out of steam around the downward sloping 4-hour 100-MA line seen now at 82.93. 

Eyes Australia CPI

The consumer price index (CPI) is seen rising 0.6% q/q in the first quarter. That amounts to an annualised figure of 2.2%, which is significantly higher than the previous quarter’s print of 1.5%. The RBA’s trimmed mean is seen rising 1.8% y/y and 0.5% q/q. 

The Aussie stands to gain if the CPI shows acceleration in the price pressures at a time when the inflation may have peaked across advanced world. 

Meanwhile, the JPY side of the story remains at the mercy of the overall market sentiment and the action in the treasury yields. 

AUD/JPY Technical Levels

The cross was last seen trading around 83.05 levels. A breakdown of support t 82.93 (4-hour 100-MA) would expose 82.37 (4-hr 50-MA) and 82.00 levels. On the higher side, breach of hurdle at 83.26 (Apr 11 high) would expose 83.72 (Apr 10 high) and 84.00 (zero levels). 

 


05:06 AUD/USD down to test 0.7550 amid thin markets, Aus Q1 CPI eyed

The AUD/USD pair failed to take on the overnight recovery mode beyond 0.7570 levels, now pushing the rates lower towards the mid-point of 0.75 handle.

The spot trades largely subdued so far this session, in absence of fresh fundamentals drivers amid holiday-thinned markets, as the Australian traders are away on a National holiday – ANZAC Day.

Also, muted trading activity in gold and copper prices on Comex further adds to the softness seen behind the resource-linked Aussie. Copper futures trade flat around $ 2.565/ pound, while gold trades -0.15% just ahead of $ 1275.

The Aussie witnessed two-way trades yesterday after the fear trade got wiped-out amid French election optimism and subsequent sell-off in the greenback across the board. However, the upside lost pace after the USD index pulled back and oil prices turned lower.

All eyes now remain on the upcoming US consumer confidence and new home sales data lined up for release later in the NA session, while tomorrow’s Aus Q1 CPI data will shape up next direction in the pair.

AUD/USD Levels to watch   

At 0.7559, the immediate support is located at 0.7547/43 (20 & 200-DMA). Selling pressure is likely to intensify below the last, dragging the Aussie to 0.7470/69 (intermittent support) and below that 0.7446 (Jan 13 low). On the flip side, the pair finds the immediate resistance at 0.7595/0.7600 (50-DMA/ round number) above which gains could be extended to the next hurdle located 0.7614/16 (Apr 17 & 4 low) and 0.7650 (psychological levels).


04:40 Goldman Sachs is a short-term bear on Gold

As per LiveSquawk report, the investment Goldman Sachs is now a short-term bear on gold, expecting the safe haven yellow metal to drift lower to $1200 over the three months before settling to around $1250 levels over the 12-month period.


04:34 Trump willing to delay border wall push - Politico

At reception with conservative media, the US President Trump noted that he would delay a fight over a wall at the US-Mexico border until September to avert a government shutdown, Politico reports.


04:22 Japans Aso: Economy has prospered due to the benefits of free trade

Japanese finance minister Aso is on the wires now, via Bloomberg, talking on the importance of free trade.

Main Headlines:

Economy has prospered due to the benefits of free trade

He shared importance of free trade at the G20

Can't say anything on the sale of Japan Post shares at this time

Wants to continue flows of free trade


04:18 Canadian ministers Freeland & Carr condemn unfair, punitive duties on lumber

Canadian Foreign Minister Chrystia Freeland alongside Minister of Natural Resources Jim Carr crossed the wires last minutes, via Reuters, responding to the Trump administration’s plans to impose 20% tariff on the Canadian soft lumber imports.

Key Headlines:

Canada condemns unfair, punitive duties on lumber

Will defend the softwood lumber industry, possibly through litigation


04:16 PBOC set the Yuan reference rate at 6.8833

The People's Bank of China (PBOC) set the Yuan reference rate at this Tuesday morning 6.8833 vs. Monday's fix of 6.8673.


04:07 PBOCs Yi: China prioritizing full convertibility of its currency

South China Morning Post reporting comments from the PBOC deputy governor Yi Gang, commenting on convertibility of its currency and international trade barriers.

Key Quotes via Bloomberg:

"We have to work on removing existing barriers for the internationalisation of the renminbi so that we can make the renminbi a freely useable currency" 

Renminbi exchange rate reform will be a "market-driven" process based on the needs Chinese companies and households.

The PBOC intends to allow "better service for offshore renminbi transactions" including easier payment infrastructure and issuance of more licenses for foreign institutions to underwrite and settle renminbi-denominated bonds, also known as "Panda bonds"


04:00 Australia s Q1 2017 CPI preview - NAB

National Australian Bank (NAB) is out with a brief preview on the upcoming Australian Q1 CPI report, scheduled for release tomorrow at 0130GMT.

Key Points:

Underlying inflation is likely to remain weak and below the RBA's target band

Ongoing labour market softness will keep wages inflation contained

Rent inflation will also be weak at a time of increasing dwelling supply

However, potential government policies to tackle house price growth could impact rental growth going forward in both directions

We will continue to monitor further developments in this space in the lead up to the May Federal Budget

The recent strengthening of the AUD (until the past few weeks) will keep imported cost pressures low, further helped by continuing competitive pressures in the retail sector

However, the NAB Business Survey continues to show deteriorating conditions in the retail industry, which might hamper the industry's ability to absorb any further imported cost pressures in the future

Cyclone Debbie which hit Queensland in late March has caused damage to key crops and will raise headline inflation in Q2 via higher fruits and vegetable prices but will not impact core inflation

Overall, our inflation outlook is largely unchanged, with core inflation below 2% in 2017 and 2018, picking up to 2% y/y by end-2019

Headline inflation is a little higher due to temporary cyclone impacts, fuel price and tobacco excise increases


03:55 Wilbur Ross: Its been a bad week for US-Canada trade relations

As per LiveSquawk report, US Commerce Secretary Wilbur Ross has expressed regret for the worsening of US-Canada trade relations.

Ross said, “It’s been a bad week for US-Canada trade relations”. The comments come after Trump administration said it plans to impose a 20 % tariff on Canadian soft lumber imports.

Key quotes

Canada has already retaliated against US dairy producers for expected US lumber duties

Canada has treated us very unfairly

 

 


03:51 June FOMC is a close call - BAML

Analysts at Bank of America Merrill Lynch (BAML) released their outlook for the FOMC decision, noting that "June is a close call".

Key Points:

June: the data are not quite strong enough to pull the trigger ... the Fed hints at a later date for changing the balance sheet policy

September: the Fed hikes and offers more details on the reinvestment policy

December: another hike and a formal plan for the balance sheet is released

March 2018: they announce the change to balance sheet policy in the statement, effective April

Fed officials have been preparing the market for a change to the balance sheet policy

This is consistent with the Fed's larger communication strategy - slowly hint at policy changes and test the market reaction

In our view, the Fed is still prioritizing interest rate normalization over the balance sheet

We think that the Fed would like to bring rates to at least a range of 1.25 - 1.50% (two more hikes) before shrinking the balance sheet

We believe it is a tall order for the Fed to deliver two more hikes and change the balance sheet policy before year end

Leaving us to argue that balance sheet reduction is a story for early 2018


03:43 GBP/USD testing key support near 1.2770, will it hold?

The overnight tepid-recovery in GBP/USD lost legs just shy of 1.28 handle in Asia opening trades, knocking-off the rate back towards the key support zone just ahead of 1.2770 levels, where it now wavers.

A minor-bounce staged by the US dollar versus its main peers combined with receding appetite for risk assets appear to be weighing slightly on the risk currency GBP. The USD index found support from latest Trump headlines, as reported by Dow Jones, citing that the US President Trump's administration plans to impose 20% tariff on Canadian soft lumber imports.

Meanwhile, increased cautiousness ahead of the second round of French election on May 7, especially after Le Pen announced her resignation from the National Front leadership, also somewhat dampened sentiment.

Adding to this, alert on a potential North Korean nuclear test expected today also keeps the higher-yield cable on the back foot. Looking ahead, the spot may remain confined within a tight range amid thin markets and limited macro news from the UK docket. Australia and New Zealand markets are closed today in observance of Anzac Day.

Attention now shifts towards the US calendar, with the CB consumer confidence and new home sales data due later on Tuesday, while the main markets moving events for the spot in the week ahead are likely to be Trump’s tax reform plans announcement and GDP figures from both the UK and US.

GBP/USD Levels to consider            

Momentum above 1.2800/01 (round number/ 5-DMA) could lift the pair above 1.2851 (Apr 20 high), beyond which a test of 1.2912 (flash rally high) is imminent. Conversely, a break below 1.2758 (Apr 21 low), leading to a subsequent break below 1.2725 (10-DMA) is likely to drag the pair towards testing its next support near 1.2700/1.2694 (zero figure’ classic    S3).


03:41 What s the outlook for the US economy? - Nomura

Analysts at Nomura said that they expect to see continued growth with balanced risks in the US economy.

Key Quotes:

"Activity: In the wake of the election, we expect the Republican-led Congress and the Trump administration to support fiscal stimulus. That stimulus is likely to include sizable tax cuts that will likely be passed sometime in late in the year. We also expect slightly higher federal spending on defense and infrastructure. Two sets of less conventional policies – new restrictions on trade and immigration– have the potential to limit growth. We expect the Trump administration to impose additional barriers to US imports, lifting prices of imported products. Such trades barriers also could incite retaliatory actions by other countries (hurting exporters). We also expect the Trump administration to put in place policies that will restrict the inflow of new immigrants and increase the outflow of existing immigrants. This could have a notable effect on labor force growth, which, in turn, would limit economic growth. At this point, uncertainty clouds the outlook for policy, but our preliminary assessment suggests that proposed tax cuts and federal spending should boost growth in late 2017 and into 2018 before the negative effects of restrictive trade and immigration policy start to take over and reduce growth in 2018 and beyond. 

Inflation: We expect core CPI inflation to remain slightly above 2%, while core PCE inflation should trend gradually higher as inflation of core goods and healthcare services picks up while rent inflation slows somewhat. With oil prices generally trending higher since Q1 2016 we expect headline inflation to move somewhat higher this year, on average. With steadily increasing pressure induced by fiscal policy, we believe core inflation will grow slightly faster in 2018 than we previously expected. Policy: After years of the Federal Reserve being “the only game in town,” fiscal support is coming. The Fed will likely be more aggressive in response to major fiscal stimulus as the economy is closer to full employment than we had expected before the election. We forecast the Fed to conduct two additional hikes in 2017 and two in 2018. 

Risks: There remains significant uncertainty surrounding our forecast as there is little concrete information on which fiscal policies will be enacted. It could take many months for that uncertainty to clear. Also, geopolitical uncertainty, slower global growth, the strong dollar, and tight financial conditions remain key risks to our outlook."


03:40 PBOCs Yi - Pressure from capital outflows has eased

Comments from the People’s Bank of China (PBOC) Deputy Governor Yi Gang crossing the wires via Bloomberg – says non-performing loans have stabilized and the pressure from capital outflows has eased as the nation’s economic recovery takes hold.

Key quotes

As the economy stabilizes, the government will further open up stock and bond markets and promote the use of the Yuan overseas

Central bank will pursue “prudent” monetary policy, balancing the need for economic stability while reducing financial leverage and controlling “asset bubbles”.

The overall risk is under control


03:32 USD/JPY flirts with 1-hr 50-MA, eyes treasury yield

The decline from Monday’s early Asian session high of 110.52 appears to have run out of steam in the Asian session today, with the  pair taking support of the upward sloping 1-hour 50-MA seen at 109.62.

At the time of writing, the USD/JPY was flat lined around 109.80 levels.

10-year T-yield failed at key resistance

The 10-year treasury yield jumped to a high of 2.325% on Monday before trimming gains to hover around 2.27%. The decline from 2.325% marked the failure to hold above 2.31%, which is the resistance offered by the neckline of the double top reversal pattern on the 10-yr yield weekly chart.

The action in the treasury yield warrants caution on the part of the Yen bears.

Japan services PPI released today bettered estimate, but had little effect on the USD/JPY pair. The currency pair is likely to track the treasury yields and broader market sentiment ahead of the US consumer confidence and housing data release.

USD/JPY Technical Levels

A break above 110.09 (Apr 7 low) would open doors for 110.52 (previous day’s high). A daily close above the same would expose 111.85 (50-DMA). On the lower side, breach of hurdle at 109.33 (5-DMA) could yield a pullback to 109.06 (10-DM) and 108.81 (200-DMA).

 

 


03:24 USD/CNY fix projection: 6.8897 - Nomura

Analysts at Nomura offered their projections for today's USD/CNY fix 224 pips higher than the previous fix.

Key Quotes:

"Our model1 projects the fix to be 224 pips higher than the previous fix (6.8897 from 6.8673) and 33 pips higher than the previous official spot USD/CNY close of 6.8864. The basket implied change is 38 pips higher than the previous official spot USD/CNY close (6.8902 from 6.8864).


03:19 Top Iron-ore forecaster says prices will sink back below $50 - BBG

Justin Smirk, top iron-ore forecaster and senior economist at Westpac, noted in his recent report that he sees iron-ore retreat back below $50 a metric ton next year as supplies go on rising.

Key Points via Bloomberg:

The raw material will drop to average $62 in the third quarter and $59 in the final three months of this year before falling through 2018 to a low of $41

Westpac placed first in predicting prices in the first quarter, according to data compiled by Bloomberg

“As supply builds up and prices come off, people will begin to question the wisdom of holding on to inventories”

“The signs are now pushing in one direction: while we’ll get some volatility, the momentum is just on a downward trend now”


03:09 Kantar Poll: Scots don t want another independence vote - RTRS

According to a Kantar survey, most Scottish voters do not want another referendum on independence from the UK and support for secession itself appears to have weakened, Reuters reports.

Key findings from the survey:

Kantar's surveyed 1,060 adults carried out after Scotland's First Minister Nicola Sturgeon called for a referendum to be held in autumn 2018 or spring 2019.

Of those interviewed, only 26% thought an independence vote should be held on either of those dates, while 18% thought it should take place later. But 46% thought there should be no referendum at all.

55% would vote against it, while 37% would vote in favor and another 8% were undecided.


03:08 USD/CAD spikes on Trump-Trudeau stand-off and 20% tariffs on Canadian lumber

Currently, USD/CAD is trading at 1.3552, up 0.40% on the day, having posted a daily high at 1.3556 and low at 1.3497.

Trump's administration plans to impose 20% tariff on Canadian soft lumber imports - DJ

USD/CAD has rallied out of the tight ranges of the US market. USD/CAD just jumped 40 pips on the back of news hitting the wires that Trump plans to impose 20% tariff on Canadian soft lumber imports. Trumps relation with Prime Minister Justin Trudeau who is sticking to his guns in respect to Trump's pressures of late over such industry as 
energy, lumber, and dairy after Trump recently said that Canadian dairy policies were a “disgrace” to U.S. farm workers.

USD/CAD levels

Near-term support comes in at 1.3420 while the market is better bid with the medium term MA’s bullishly aligned as spot takes on the mid point of the 1.35 handle. 1.3580 is on the cards now we are at 2017 fresh highs, so a test of 1.3580 opens 1.3600. 1.3409 holds the downside target. Analysts at Brown Brothers Harriman offered their analyses, “The technical indicators point to additional US dollar strength, with CAD1.36 being the next obvious target. In addition to corresponding to the highs from Q4 16, it is also the 50% retracement objective of the US dollar slide from the January 16 high near CAD1.4700.  The greenback's sharp advance is forcing the Bollinger Band to widen. The upper band is found near CAD1.3500.”


02:52 Japan Corporate Service Price (YoY) remains unchanged at 0.8% in February


02:31 NZD/USD: awaits US catalysts this week, corrected 60% of 0.6980/50 rally

Currently, NZD/USD is trading at 0.7013, down -0.04% on the day, having posted a daily high at 0.7020 and low at 0.7012.

NZD/USD is sidelined in early Asia having filled the bullish French election gap and moving to demand at the 200 ema on the hourly sticks at 0.7010 and key support.

US data previewed: start of a busy week - Nomura

While the day was subdued overnight in the consolidation of the start of the week gaps and without any US data, eyes look ahead to durable goods and the first estimates for Q1 GDP at the end of the week. The NZ trade balance will also feature but will be potentially taking a back seat with the main focus on Trump's plans for tax reform following last week's promises. At the same time, Congress will be meeting to discuss the debt ceiling that could pose a risk to financial markets if the Democrats and Republicans can't find a middle ground on various policies. Meanwhile, the  Fed and RBNZ with the Fed’s tightening cycle remaining as a key focus should maintain upside pressure on US interest rates and the US dollar.

NZD/USD levels

While consolidated at the midpoint fo the 20th April rally to 0.7050, the 200 ema on the hourly sticks is a key support just ahead of the 0.7000 psychological level that guards space to 0.6933/50. A break of the 0.69 handle opens up the 0.6885 mark as being the recent lows guarding 0.6675 as the 29th May 2016 on a break of the 0.67 handle. Bulls have the 17th April highs of 0.7035 is sight protecting 0.7060/70 and recent high today around the 200-d ema (0.7067). There is a double bottom at 0.7130 as the mid-Feb lows.


02:26 Trump s administration plans to impose 20% tariff on Canadian soft lumber imports - DJ

According to Dow Jones, U.S. President Trump's administration plans to impose 20% tariff on Canadian soft lumber imports.


01:51 US data previewed: start of a busy week - Nomura

Analysts at Nomura offered a preview of the start of this week's busy US data schedule.

Key Quotes:

"Case-Shiller home price index: The Case-Shiller 20-city home price index was up 5.73% y-o-y in January, accelerating somewhat from the average pace in 2016. The recent acceleration may have been in part driven by a lean supply of available housing units and steady demand for housing. A sharp pick-up in mortgage rates after the election may have also contributed to higher home prices, because of the last-minute rush to purchase homes prior to further increases in mortgage rates. Consumer fundamentals have been favourable for housing demand, with a steady pace of job creation and income growth. Further, National Association of Home Builders surveys suggests that the traffic of prospective buyers remained elevated in March and April. But increasing home prices may hurt home affordability and price out potential home buyers in the long run. Consensus expects an increase of 5.78% y-o-y for February. 

New home sales: Incoming data suggest some moderation in new home sales in March following two previous months of outsized gains, partly boosted by unusually warm weather. Although surveys by the National Association of Home Builders suggest that traffic of prospective buyers remained healthy in recent months, we think the negative impact from mean reversion will outweigh healthy demand for housing. Thus, we forecast a 3.0% m-o-m decrease to an annualized rate of 574k (Consensus: -1.5% to an annualized 583k). Yet, as new home sales tend to be volatile on a monthly basis, we caution against reading too much into a single reading. We expect modest increases in employment and wages to continue in the medium term, and these factors would support consumer demand for new homes. 

Conference Board’s Consumer Confidence: Conference Board’s index rose further to 125.6, the highest since December 2000. Assessments of both current and future conditions improved strongly to historical highs. The pace of job creation and income gains remained steady, coupled with the unemployment rate inching down for the past three months. However, the University of Michigan survey noted in recent prints that political partisanship in consumer sentiment continued into April, with self-identified Democrats expecting a recession and self-identified Republicans expecting an economic boom. Considering this sharp contrast, it is possible that continued policy uncertainty may still affect consumer sentiment in the coming months. Therefore, we expect this index to plateau at 126.0 in April (Consensus: 122.5), up slightly from the March reading."


01:29 AUD/USD subdued into Asia, awaits catalyst for 0.76 handle

Currently, AUD/USD is trading at 0.7566, down -0.05% on the day, having posted a daily high at 0.7572 and low at 0.7566.

AUD/USD is consolidating in early Asia, leaving off from where the US session handed over a subdued state of play. This follows a large opening gap from yesterday's results of the first round of the French elections, leaving Macron the favourite to win the second round of presidential elections as a centralist that the entire globalists support over Le Pen. 

Markets get carried away with Macron

This event resulted in risk-on mode from the get-go, although the Aussie was still capped below the psychological 0.76 handle, weighed particularly by base metals Friday's closing prices, that, incidentally, have been recovering to some degree at the start of this week. AUD/USD's key events this week come in Aussie CPI, US durable goods and first estimates of US GDP Q1. There will also be political risks in the US Congress when they meet to decide upon the US debt ceiling. Trump has also promised to deliver his sweeping tax plans as his first 100 days draw closer. 

AUD/USD levels

AUD/USD is stuck within a range April boundaries between 0.7473/0.7610. The April high and the 55-day moving average is located at 0.7610/15 and while below there, analysts at Commerzbank suggest the downside risk remains in play.  A break higher, mind you, looks to the 2nd April highs at 0.7640 and 0.7680 late March highs. On the flip side, we have 0.7500 psychological level before 0.7480 and 0.7400. 


00:59 FXStreet s US session manager evacuated, reporting on Santiago s, (Chile), BIG quake mag 6.8

A large earthquake off the coast of Chile that has rocked buildings in Santiago, incidentally where our American session manager, Felipe Erazo is based, (now working from outside of his building as a safety precaution) and was upgraded to magnitude 6.8.

Felipe has reported to us that the Govt has ordered the precautionary evacuations of coastal areas in Valparaiso and O Higgins given it was just 35km west of Valparaiso and at a depth of 33km. 


00:21 Steel and the Trump Twist- BBH

Analysts at Brown Brothers Harriman explained that the US investigation into steel imports is not particularly novel.

Key Quotes:

"The US steel industry is highly organized for such purposes.The steel sector has the significant global excess capacity, which makes for intense competition. 

What is relatively new about the investigation is that it is being conducted under Section 232 of the 1962 Trade Expansion Act, claiming that the steel imports are a threat to national security.  It has only been used 14 times in its 55-year history. It has not been used since 2001 when George W Bush launched a year-long investigation into iron ore and steel, and ultimately took no action under Section 232.  When the announcement of the investigation was made, the President was not surrounded by generals, but by industry CEOs. 

The threat to national security seems a stretch. The Pentagon has not sought to restrain imports, and its steel needs are met by domestic producers. The US is the fourth largest crude steel producer in the world behind China, Japan, and India.  It produced nearly 80 mln metric tons in 2015, down from 88 mln tons in 2014.  In the first 12 weeks of the year, the US produced an average of about  1.75 metric tons a week, roughly a 5.3% gain from the same year ago period. It was utilizing about 73.3% of its capacity. 

It is interesting to note that as domestic output was rose, imports also increased.  The Department of Commerce estimates that carbon steel imports (including semi-finished products) were up around 18% year-over-year though they had fallen by a little more than 4.5% in March.  In 2014, the US exported 11 mln metric tons of steel and imported 39 mln metric tons. Imports account for almost one-sixth of US consumption. The value of the iron and steel produced in 2014 was estimated at $113 bln   

The Department of Labor estimates that the steel industry directly employs about 145k workers in the United States.  At it peak in 1953, 650k workers were directly employed by the steel industry.  What happened to 80% of the jobs in the steel industry?  According to the industry association, labor productivity has increased five-fold since the early 1980s. Then it took a little more than 10 hours to produce a finished ton of steel.  By 2014, this had fallen to 1.9 hours. Now that is productivity.   

Unfair trade practices may not have helped, but the real culprit, as in so many industries, is technology.  US steel companies have moved away from the making steel by reducing metallic iron from ore and making pig iron and steel. It is less interested in extraction of raw materials and more interested in recycling.  Mini-mills or specialty steel mills essentially recycle scrap steel and account for nearly two-thirds of US steel production. 

In addition to citing national security, the other way the Commerce Department's investigation may differ from other such investigations is the time it will take. The law allows for a 270-day period. Last week President Trump said the investigation would take 50 days. Don't be surprised if the US President learns that steel, like health care and Chinese relations, are more complicated than he thought.   

What caught some investors and observers off guard was that it seemed that the Trump Administration would be favoring consumers over producers.  His Administration had granted the Keystone pipeline an exemption from having to use American made steel. The rhetoric about boosting auto production in the US would seem to favor cheap steel.  The auto industry accounts for a quarter of US steel consumption.    

Tariffs are often the result of the Commerce Department investigation. That raises the price of imports, and domestic producers often will raise their prices too (because they can).  Higher cost steel can boost the sales price of vehicles as the cost is passed on to the buyer. This is one of the problems of such unilateral action.  Multilateral recourse, available through the World Trade Organization could address the underlying action:  dumping or selling the steel below the cost of production.  How many time must we learn that an eye-for-an-eye and a tooth-for-a-tooth kind of justice results in a village of blind, toothless people? Despite assertions that multilateral institutions have been hijacked and no longer serve their initial sponsor's' (the US) interest, the US has won about 85% of the case it has brought to the WTO.   

When the President signed the Executive Order regarding the steel investigation, he played down the role of China.  However, Commerce Secretary Ross seemed to emphasize China, which accounts for around 2% of US steel imports.  Partly due to the trade policy, which also included tariffs on some steel products, US imports of Chinese steel have fallen by half over the past two years.  Steel, not pharmaceutical or autos, seems to be the first industry that the Trump Administration will investigate.   

The populist-nationalist wave was turned back in the third eurozone member (Austria, Netherlands, and now France).  The AfD in Germany appears to be imploding.  However, last week's IMF meeting, like the G20 meeting, could not hammer out language on a trade that was acceptable to the new US Administration.  The call to avoid protectionism, and even a compromise, like a reference to fair trade was not included in the IMF statement.  Still, the anti-dumping action is not the same species as protectionism.  However, the claim that national security interests are at stake seems to be overplaying that hand. An investigation in a fifth of the time that is allowed may seem like the conclusion is already known. "


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