FOREX News Today

FX Update: The dollar has trader softer today, which has driven EURUSD to a one-week peak at 1.1213 and USDJPY to a two-week low at 108.83, although some yen outperformance was a factor in the latter. The yen rallied with as the mood in most stocks markets in Asia remained cautious, while currency strength in turn exacerbated losses on the Tokyo Stock Exchange. The Nikkei 225 underperformed the region notably with a 2.3% loss. The longer-than-anticipated delay to the planned sales tax hike, announced by PM Abe yesterday, was held as a yen bullish view by some, though this shouldn’t affect BoJ policy considerations given disinflationary pressures and with the central bank holding two of the “three arrows” in the Abenomics stimulus plan. A Reuters survey two weeks ago found a strong consensus favouring the BoJ to expand policy by July, via the QQE program and possibly by a deepening of NIRP. Two big external events are approaching, the first being the ECB’s June policy meeting today, and the next being the release of the May U.S. payrolls report tomorrow. The former is not likely to be a market shaker as the central bank is an affirmed wait-and-see stance. The latter will be looked to in context of Fed tightening possibility at the upcoming FOMC on June 14th-15th. The general view at the moment is that after indifferent U.S. data this week, and given Brexit vote in the UK on June 23, the Fed will delay the decision until the FOMC in July.

European Outlook: Oil prices are under pressure and the front end WTI future below USD 49 per barrel ahead of the OPEC meeting. U.K. stock futures are posting small gains, but U.S. futures are also down and leads remain supportive for European bond futures, which already moved higher yesterday, with Gilt futures outperforming. Bund traders were cautious ahead of today’s ECB meeting, with Draghi unlikely to strengthen the dovish message at the moment and instead focus on putting further pressure on governments to implement reforms to complement the accommodative policy.

Poor Global manufacturing PMI’s: Although U.S. data revealed encouraging May gains in the ISM, to 51.3 from 50.8, and in vehicle sales, which we now peg at a 17.6 mln rate from 17.3 mln in April. Unfortunately, we also saw an April pull-back in construction spending after upwardly-revised Q1 gains that lowered GDP growth prospects on net, though we now assume a Q1 GDP boost to 0.9% from 0.8%. The April construction drop likely reflects some give-back of a winter weather-boost, and we still assume a solid spring-season for housing given April strength in pending, new and existing home sales. The PMI data from Asia and Europe was also weak with on the UK showing a move forward.

Canada Q1 GDP disappoints: Disappointing but not Disastrous: Canada’s 2.4% real Q1 GDP gain undershot relative to expectations. While the 0.2% m/m drop in March GDP left a poor hand-off for Q2 GDP, a contraction had already been factored in for that quarter due to the halt in oil production. Hence, Q1 and March GDP do not alter the underlying growth story for Canada in 2016, although the Q1 performance does suggest and even longer path back to sustainable growth than had been previously assumed. The longer wait implies an even more drawn out period of time at currently accommodative rates from the Bank of Canada.

Main Macro Events Today

• ECB Meeting & Press Conference  The central bank is widely expected to keep policy on hold at today’s council meeting, leaving the focus on Draghi’s press conference and the updated set of staff projections. We don’t expect a big change to the inflation forecasts, but the growth forecast for this year could be lifted after stronger than expected first quarter growth numbers. Draghi’s overall message though is likely to be the same as the last time around: The ECB is firmly in “wait-and-see” mode and focused on implementing the measures already announced, with the corporate bond purchase program starting this month. The ECB leaves the door to further easing open, but is unlikely to step up the dovish message, as council members increasingly shift the focus to the need for government action and structural forms to complement the ECB’s accommodative policy stance and help lift long term growth potential.

• BOE’s Governor Carney speech The new GBP five pound note is being unveiled and the Governor is due to speak, Brexit will inevitably be raised with reporters hanging on to any reference for policy implications.

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

FOREX News Today

Sterling remains under pressure on new Brexit polls that showed a swing in support for the Leave campaign. The FT’s Brexit poll tracker is now showing 46% in favour of Remain and 43% in favour of Leave, versus respective figures of 46% and 41% that were being shown yesterday morning (London time). Bookmaker Ladbrokes are now reporting 75% of all Brexit bets are in favour of the UK remaining in the EU, down from 79% seen yesterday morning and off from the 81% level seen at the end of last week. At the same time in Japan PM Abe announced a two-plus year delay in the planned sales tax hike (which had been scheduled for April next year), raising concerns about fiscal sustainability although a widely anticipated move.

China’s manufacturing PMI was unchanged in May at 50.1, while the Caixin/Markit index slipped to 49.2 from 49.4. Those numbers are disappointing and could leave a bearish tone in equities. Though the manufacturing PMI is above the 50 expansion-contraction mark for a 3rd straight month, it’s been on a softening trend since mid 2014 and will add to worries over a growth slowdown. The non-manufacturing PMI slipped to 53.1 from 53.5. Also, the Caixin manufacturing PMI dipped to 49.2 from 49.4. That’s where it was a year ago. It’s a 15th consecutive month in contraction.

Switzerland’s economy expanded sluggishly in the Q1 2016 as government spending fell for the first time in 12 months. The slowdown to 0.1 % followed a period of expansion of 0.4% in the last quarter of 2015 and was less than the 0.3 % growth that economists forecasted. The report published by the State Secretariat for Economic Affairs in Bern also showed that government spending dropped 0.8 %.

Atlanta Fed’s GDPNow estimate remained at 2.9% for Q2 unchanged from the last reading on May 26 after taking the measure of the personal income report this morning: “The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.9 percent on May 31, unchanged from May 26. The second-quarter forecast for real consumer spending growth remained at 3.6 percent after this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis.” See the Atlanta Fed GDPNow website for more insight.

Yesterday’s US reports revealed a hefty 1.0% April surge for consumption that beat estimates and dominated the day’s headlines, alongside a largely expected 0.4% April income rise, and disappointing May declines for the Chicago PMI to 49.3 from 50.4, for the Dallas Fed index to -20.8 from -13.9, and for consumer confidence to 92.6 from 94.7 (was 94.2). The big April spending surge lifted our Q2 GDP forecast to 2.6% from 2.0%, with a solid 3.47% (was 2.3%) Q2 growth clip for real consumption. Output is rebounding in Q2 as we approach the end of the inventory headwind, despite the day’s ugly confidence and sentiment setbacks for May.

• Euro Area Manufacturing PMI: Eurozone Manufacturing PMI numbers for May are out today and are expected to be confirmed unchanged at 51.5. Manufacturing PMI has fallen from 53.2 to 51.5 in 2016.

• UK Manufacturing PMI: While UK manufacturing PMI high in 2015 was 55.5 the current numbers are considerably lower. Today’s release is expected to confirm the number at 49.6 which would be an improvement from April’s disappointing number of 49.2.

• US Fed’s Beige Book: Fed’s Beige Book for the month of May is published today. Markets look forward to this publication in order to gain insights on Fed’s thinking process in terms of the future interest rates policy.

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

FX News Today

European Outlook: Asian stock markets are mostly higher and U.S. and European stock futures also remain underpinned. This should keep pressure on Bund futures, which moved sideways in after hour trade yesterday after a declining sharply during the main session. Gilt futures could underperform in catch up trade, after yesterday’s holiday. The European calendar is again very busy, with German retail sales at the start of the session, followed by German and EMU unemployment data. The focus will be on the next set of preliminary May inflation numbers from France, Italy and for the Eurozone as a whole. After the higher than expected German number we see Eurozone HICP lifting out of negative territory to 0.0% y/y (med -0.1%) from -0.2% y/y, thus backing the ECB’s wait and see stance ahead of Thursday’s council meeting.

Japanese sales tax announcement: As Japanese housing starts rise the most in 10 months with a 9.0% y/y rise compared to expectations of only 3.9% all eyes are on PM Abe and the expected announcement in the sales tax hike that was due next year. Mr Yamaguchi (the coalition partner of the PM) is due to speak with the press later today. Mr Abe met with his with Finance Minister Mr Aso (who opposes the postponement of the sales tax) yesterday in a bid to rearranged summer elections for support of the sales tax deferment. The “will they wouldn’t they” has helped the continued easing of the yen with USDJPY trading at 111.28 and GBPJPY 163.26.

Australian Data: A poll by Bloomberg of 27 economists has raised Australian Q1 GDP to 0.8% from 0.6%.  Exports fared much better than expected and building approvals were significantly better than expected coming in at 3.0% whilst expectations were for a 3.1% decline.  Balance of payments missed expectations but private sector credit held up and was a slight improvement net at 0.5% from last month’s 0.4%. The AUD has reacted positively to the raft of good news with the AUDUSD rallying to the 0.7250 handle, next stop the Daily 200 DMA at 0.7260.

Fedspeak:  St Louis Fed’s Bullard did not comment on policy or the economy in the text of his rather academic talk on “Incomplete Credit Markets and Monetary Policy with Heterogeneous Labor Supply,” at a Bank of Korea event. In Q&A, however, the voting president confirmed his desire that policy remains dependent on the data. Hence he said he’d like to reserve judgement on the June 14, 15 outcome, especially as there are a lot of key numbers on the immediate horizon. He was mildely encouraged by the revised GDP number on Friday, where growth was bumped up to 0.8% from 0.5%. The global markets should be well prepared for a possible hike. We suspect Bullard will vote for a rate increase next month if the data don’t disappointing.

Main Macro Events Today

• EURO Area CPI We are looking for Eurozone headline inflation to lift to 0.0% y/y  from -0.2% y/y in the previous month. German data yesterday came in a tad higher than originally expected, confirming that the drop back last month was largely due to base effects connected to the earlier timing of Easter this year, which saw holiday related prices peaking in March, rather than April and thus added to the variation over the March/April period. In any case, expectations for a gradual rise in the headline rate remain intact and with the ECB firmly in wait and see stance and focused on implementing the measures already announced, the HICP rate this month will not have much of a bearing on the discussion on Thursday.

• US Consumer Confidence  May consumer confidence is out on Tuesday and should reveal an increase to 95.0 (median 96.0) from 94.2 in April and 96.1 in March. This compares the already released Michigan Sentiment data for the month which revealed a headline increase to 95.8 from 89.0 last month and the IBD/TIPP poll which increased to 48.7 from 46.3.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

FOREX News Today

European Outlook: The major currencies have traded without direction with markets hunkered down into Fed chairwoman Yellen’s speech later today, and ahead of the long U.S. holiday weekend. The dollar has lost its rallying impetus, tracking a decline in U.S. Treasury yields as markets take a more circumspect view of Fed tightening prospects. USDJPY has consolidated in the mid-to-upper 109s after failing to sustain gains above 110.0 this week. Japanese inflation data showed core CPI remained unchanged in April at -0.3% y/y, slightly above the median for -0.4% y/y. The BoJ’s has been (forlornly) targeting core CPI at 2%. The data didn’t impact markets much but will cement expectations for the central bank to expand policy by July. EURUSD has traded a narrow range near 1.1200, above the 10-week low seen on Wednesday at 1.1129. Commodity currencies have settled after recent gains. Oil prices have corrected from the seven-month highs seen yesterday. Asian stocks have mostly gained today. Data out of China showed industrial profit growth decline to +4.2% y/y in April, down from 11.2% in the prior month.

G7 News from Japan: Topics ranged from North Korea, Russia,  & China to skirting around the FX situation and vowing to pursue economic growth. “Global growth remains moderate and below potential, while risks of weak growth persist,” the G7 leaders said after a two-day summit in central Japan. “Global growth is our urgent priority.” Japanese Prime Minister Shinzo Abe has been playing up what he calls parallels to the global financial crisis as growth in his country sputters.

US Data Releases; some strong, some weaker:  US reports revealed a 3.4% April durable goods pop and a welcome 10k drop in initial claims to a respectable 268k that further unwound the early-May spike to a 294k one-year high. The component data for the durables report were weaker than expected, however, leaving a mixed set of data for the day, and we’ve lowered our Q1 GDP growth estimate to 1.0% from 1.1% in today’s release, versus the 0.5% advance figure. We still expect an inventory-restrained 2.0% GDP growth clip in Q2 with a 3% pace for real equipment spending, despite a disappointing 0.8% April decline for ex-transportation equipment orders, and we still peg the May nonfarm payroll rise at 190k.

Fedspeak:  Powell – said another rate hike could be seen “fairly soon,” in the text of his speech on “Recent Economic Developments, the Productive Potential of the Economy and Monetary Policy.” We seldom hear comments on policy or the economy from this Fed official, so his near term forecast is important. However, he wants to see a “significant strengthening in growth” in Q2, including further strong job gains and declines in the unemployment rate and other measures of slack, along with increases in wages. Should data support his expectations, he is in favor of gradual rate increases. He noted the asymmetric risks of zero rates, headwinds from weak global demand and geopolitical events, a lower long-run neutral funds rate, and the “apparently elevate sensitivity of financial conditions to monetary policy.”

Main Macro Events Today

• Yellen to speak at Havard As we reported on Monday the highlight of Fedspeak this week. Her colleagues have been fairly consistent in talking up a rate rise at either the June or July meetings. As Chair and chief moderator she is never as direct as some on the FOMC and is unlikely to stray far from that today. However, her speech and interview with renowned Keynesian economist Greg Mankiw will be followed closely.

• US GDP  Expectations are for 0.7% Q1 rise and for the Annualized figure to be revised up to 0.9% (median- although we expect 1.0%) from 0.5%.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

FOREX News Today

Japan and the BOJ: Japan’s PM Mr Abe has announced a meeting with the press next Wednesday June 1 the expectations are that he could announce the date of a snap election and/or if the much heralded sales tax hike will go ahead next year as planned. In parliament the BOJ’s governor Mr Kuroda repeated that they will add further stimulus if required, that deflation is still not completely behind them and that it would be desirable if the exchange rate moved in a stable manner and reflected the fundamentals. USDJPY remains unmoved just shy of 110 at 109.96.

Eurogroup agree Greek debt relief: As expected the Eurozone and IMF agreed debt relief package for Greece. “On the package of reforms Greece had committed to last summer, we now have full agreement,” said Jeroen Dijsselbloem, the Dutch finance minister who presided over the meeting of finance ministers. Once all 19 eurozone members have formally signed off on the new deal, Greece will get €10.3 billion ($11.48 billion) in fresh loans, which would be given out in several installments. A first slice, of €7.5 billion could come as early as June. “It is an important moment in the long Greek program,” Dijsselbloem said. The IMF warns that Greek debt, which currently stands at 180% of GDP, would shoot to 300% of GDP without debt restructuring.

US New home sales beat estimates with a 16.6% April surge to a 619k expansion-high after big Q1 boosts, just as the median price surged to a $321,100 all-time high after upward Q1 revisions, leaving a robust start to the critical spring season for the housing sector. Inventories slipped 0.4% from a six-year high in March. New home sales are poised for a new quarterly cycle-high in the 560k area in Q2, after a 532k (was 517k) cycle-high in Q1. New home sales have risen 129% from the 273k record-low in February of 2011, alongside smaller cyclical climbs of 45% for pending home sales and 58% for existing home sales from lows in 2010. We saw big cyclical climbs of 145% for housing starts and 118% for permits from lows in 2009, and 151% for new home construction from a low in 2011. We previously saw a 1.7% April existing home sales rise to a 5.45 mln pace, a 6.6% April housing starts bounce to a 1.172 mln pace, and a 3.6% April permits rise to a 1.116 mln rate.

Fedspeak A US Federal Reserve rate hike in June or July wasn’t set in stone, but labor data suggested it was time to pull the trigger, St. Louis Fed President James Bullard told CNBC. “There’s no reason to prejudge June,” Bullard said, adding that the Federal Open Markets Committee would look at the data and decide then. Muddying the waters on the timing of the move, Bullard noted that there was no reason the Fed must hold a press conference in conjunction with a rate hike. A press conference is scheduled to follow the June 14-15 meeting, but one is not scheduled after the July 26-27 meeting. “We can wait until we get to the meeting, see what the latest data says, and try to make a good decision there. I think on the issue of press conferences, we have made many moves over the years without press conferences,” he said.

Main Macro Events Today

• BOC Interest rate Decision: No change in rates is expected in the announcement today, but Governor Poloz could emphasize the caution in the Bank’s cautiously optimistic outlook. Economic data has featured some high-profile disappointments since the April announcement: Exports and manufacturing shipments both fell in February and March. Investment intentions for 2016 showed an expected reduction in spending. And the oil sands production stoppage has tripped the Q2 GDP outlook into negative territory (we see real Q2 GDP falling 0.5%). But it is not all doom and gloom, as the U.S. economy is seeing enough improvement that prospects have firmed for two Fed rate hikes this year, with one possible as soon as June. And oil prices have firmed. We suspect the BoC will still view the ingredients as being present for the expected recovery. Recent data will be deemed consistent with an economy undergoing a difficult rebalancing, with Federal government stimulus seen providing a key lift later this year. We see the announcement as remaining consistent with an extended period of steady policy while they maintaining that they have the room to implement further accommodation if needed.

• German IFO:  The Ifo Business Climate reading for May should benefit from robust orders inflows and ongoing strong consumer demand, which already helped to lift the current conditions reading in the ZEW yesterday. We are looking for a rise in the overall reading to 106.8 from 106.6. However, the significant negative surprise in the ZEW headline number yesterday (it was less than half of expectations) highlights downside risks.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

FOREX News Today

RBA Governor Stevens: Very committed to inflation-targeting monetary policy, inflation very low and below the RBA’s target, inflation target is not rigid and the inflation target does not demand kneejerk responses. Inflation targeting will work well into the future and finally there is quite some years of fiscal repair work for the government in the period ahead. More Dovish tones from Governor Stevens,  AUDUSD down from overnight highs of 0.7256 to 0.7222 following his comments.

IMF “unconditional” debt relief for Greece: The conclusion of its debt sustainability analysis (it’s first one of Greece since mid last year). The 10-year Greek yield was down by 28 bp, putting yields at the lowest since last November, after the Greek parliament today passed the latest EUR 5.4 bln austerity-measures package, which will qualify it for a EUR 11 bln injection of bailout cash. This should make it a formality for Eurozone officials to sign-off on at today’s Eurogroup meeting. The IMF warns that Greek debt, which currently stands at 180% of GDP, would shoot to 300% of GDP without debt restructuring.

More Mixed US data : US Markit manufacturing PMI dipped to 50.5 in flash print for May, the lowest since September 2009. The index fell to 50.8 in April from 51.5 in March. It was 54.0 a year ago. The index hit a high of 57.9 in August 2014 and has generally been on a downward trajectory ever since. New orders declined versus April and are expanding at the slowest rate since December 2015, in large part thanks to weakness from foreign demand. But, input prices rose for a second straight month, though inflation remained moderate overall and was running at a slower overall pace than the series average. The recovery in producer sentiment from winter lows is proving more anemic than hoped, though sentiment has still increased on net since February despite May setbacks for the Empire State and Philly Fed headlines. The ISM-adjusted average of the major measures is poised to sustain the 51 April figure, following a 53 eight-month high in March, but much lower 49 averages in January and February. The employment components for both Empire State and Philly Fed increased, and we saw further gains in the Philly Fed price component as oil prices rebounded.

Fedspeak: Fed’s Williams repeated 2 to 3 rate hikes seem about right for 2016, with 3 or 4 in 2017. The timing will depend on economic data, he cautioned, adding the Fed will move slowly on removing accommodation he added. The FOMC will leave the balance sheet as it is for now. He forecasts about 2% growth for this year, though there are some headwinds from abroad, but it’s important that the Fed doesn’t overreact to financial market turmoil. He remains concerned about low inflation expectations, however. He sees encouraging signs that wages are picking up, though low wages remain a puzzle. There’s nothing new in these remarks from Williams, who is not a voter this year. Earlier, Bullard, a voter, speaking from Beijing, noted some data are supporting the FOMC’s views for rate hikes, while other reports are supporting the lesser views of the markets. There are some signs that U.S. growth is below trend, though the labor market’s performance has been very good.

Main Macro Events Today

• German Final Q1 GDP: German Q1 GDP, which is likely to confirm overall growth at 0.7% q/q. The quarterly growth rate is much stronger than initially expected, and the breakdown, which will be released for the first time, likely to confirm that overall expansion was boosted by strong consumption and domestic demand. Survey data already points to a slowdown in growth dynamics in the second quarter and the different timing of Easter this year may distort comparisons, so that the first half of the year may have to be seen as a whole.

• German May ZEW: German ZEW Economic Sentiment is seen improving to 11.4 from 11.2. Markets are starting to digest raised bets of a June Fed hike and with oil prices moving higher investor confidence seems to remain underpinned. Reduced Brexit bets may also help, but much will depend on when responses came in and there still is some risk of a negative surprise amid uncertainty as the period of ever easier monetary policies across the world is slowly coming to an end.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

FOREX News Today

European Outlook: Data today includes the EMU current account, UK CBI industrial trends and German PPI which is expected to rise to 0.2% from 0.0%. Overnight Asian stock markets managed to stabilise in tandem with oil prices. Crude prices rose to a seven month high and the front end WTI future has broken USD 49 per barrel. Japanese stocks are heading for a second weekly gain after recovering earlier losses with a weaker Yen helping to put a floor under markets as investors weigh the impact of a June rate hike in the U.S. on the global economy. The Nikkei is currently up 0.54%, the Hang Seng 1.20%, the CSI 300 up 0.105 and the ASX up 0.44%. U.S. stock futures are also moving higher.

Japanese Sales-Tax should be delayed: So says Etsuro Honda adviser to PM Abe the comments reported by Bloomberg says the sales tax hike planned from April 2017 should be postponed until the economy is completely free from deflation also that any economic package cannot offset the impact of the sales tax hike. This is in stark contrast to a senior member of the ruling party  (mr Yamamoto who says the economy will not recover if sales tax delay is just for show. The continued uncertainty and public disagreements by people close to PM Abe leaves a rather negative impact.  USDJPY remains north of 110.00.   

Mixed US data : The US data yesterday revealed a disappointing Philly Fed downtick to -1.8 from -1.6 that accompanied Monday’s Empire State plunge to -9.02 from 9.56, alongside a restrained 16k initial claims reversal of last week’s 20k pop that left a still-elevated 278k figure. Yet, we still have an improvement in producer sentiment since the bleak readings over the six months ending in February, and a claims rise in May after lean April data that mostly reflects seasonal adjustment difficulties from the early-Easter, the New York spring break, and the Verizon strike. We also saw a welcome 0.6% April leading indicators rise, as the index rebounds with an assumed bounce in GDP growth to 2.0% in Q2 from an upwardly-revised 1.0% (was 0.5%) in Q1.

Fedspeak – Fischer (Vice Chair) nothing revealing in his speech on policy or the economy. Dudley (3^rd most significant opinion) a hike in June or July is reasonable if the data conform to his outlook, said the Fed dove, who also noted June is “definitely” a live meeting. Of course the markets got that from the FOMC minutes yesterday, and he’s pleased with that outcome. The Q1 slowing in growth was a bit of a surprise and Q2 is shaping up to see stronger growth. The strength in retail sales helped bolster his view on the Q2 rebound. He thinks the economy is growing above trend with a tighter labor market. Brexit is another variable in the policy mix, he added. He didn’t give a time frame for the next rate hike, but rather reiterated that policy is still data dependent. He did acknowledge that it is important for the markets to grasp the FOMC’s thinking. Chair Yellen has a speech scheduled for June 6^th.

Main Macro Events Today

• US Existing Home Sales: April existing home sales data is out on todayy and should reveal a 1.3% headline increase to a 5.400 mln (median 5.390 mln) pace from 5.330 mln in March and 5.070 mln in February. Housing starts for April have already been released and posted an improvement to 1.172 mln from 1.099 mln in March and the NAHB housing sentiment index managed to hold steady at 58 from March.

• Canada CPI:  We expect CPI, due today, to accelerate to a 1.9% y/y pace in April (median +1.7%) from the 1.3% y/y pace in March. CPI is seen rising 0.5% on a month comparable basis in April (median +0.4%) after the 0.6% bounce in March. Gas prices shot 9% m/m higher in April after expanding 5.7% in March. Hence, gas prices should again provide a hefty lift to month comparable CPI. Of course, the currency appreciated further, with USD-CAD 5.0% to an average 1.256 in April. With the loonie also making headway in February and March, the exchange rate is expected to restrain price growth. The BoC’s core CPI index is seen rising 0.2% m/m in April after the stunning 0.7% gain in March. Annual core CPI growth is expected to expand at a 2.1% y/y rate in April (median +2.1%), matching the 2.1% pace in March. The BoC was sanguine about the pick-up in total and core CPI through the end of 2015, as they continued to lean on indicators suggestive of ongoing slack to make the case that the spike in core CPI was transitory. Another month of elevated core CPI will not shake the BoC’s view on the price backdrop. Notably, inflation remains on the backburner as growth is the focus.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Janne Muta

Chief Market Analyst

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