JPY Bid on Strong Japanese GDP. FOMC Minutes in Focus Today
Despite upbeat figures from the US economy on Tuesday, markets closed in negative with leading indexes down around 1% (S&P -0.9%, Dow -1%, Nasdaq -1.3%). Fixed income yields were bought on back of renewed rate speculation in the US sending the US Dollar on the bid as we had anticipated. US Housing Starts, CPI and Industrial Production came out well above expectations and this will put an extended pressure on prices and contribute overall positively to the US GDP for Q2, where it now looks as a gradual rebound compared to a slow Q1. From the UK, CPI figures came out lower than expected, but the reaction in GBP-pairs was subdued – Cable even managed to print a daily plus, while the FTSE still is stuck between the 50- and 100-day SMAs.
Overnight, Asia opened lower on back of the strong figures from the US. In Japan, however, Q1 GDP came out stronger than expected with preliminary figures showing a much stronger private consumption than expected. The overall GDP figure for Q1 rose 0.4% vs 0.1% expected and despite the Nikkei opening in negative, losses were erased and the index is in positive. We see stops building around the 61.8% fibo retracement level in the recent daily wave, where a break would give scope for a test of 17,130-area before 17,400. JPY-pairs also enjoyed the macro figures and have risen across the board, less against the USD.
This morning, European stocks also opened in negative with energy and financials leading the losses and the EUR is under pressure. The UK will take focus at 1030CET with April labour market figures, where especially the Claimant Count Rate should be noticed. Consensus is for an increase of 4.7k vs. 6.7k prior and an unchanged unemployment rate of 5.1% – lowest level since September 2005.
From the Euro Zone, final April CPI figures will be interesting as the market is expecting a slight drop in the yearly figure to 0.7% from 0.8%. EURUSD has been on the offer since printing 2016 highs in early May, but had faded below the 50-day SMA this morning with next support at the 1.1250-area, before 1.1220.
In the afternoon, oil and the CAD should be kept an eye on as we have the Canadian Foreign Securities Purchases at 1430CET, and weekly Crude inventories at 1630CET. Consensus is for another draw in inventories, but the figure has been quite volatile, so we could see some action there. Oil looks to take home it’s second weekly gain and the black gold is eyeing the $50/barrel handle.
Tonight at 20CET, FOMC minutes will be released and this should create some stir in the markets. There has been a lot of market speculation on how the Fed would address the monetary policy and markets have been swift in judging if there should be one or two rate hikes left in 2016 and the timing of these. The minutes should reveal how the committee sees this, and we expect this release to be the main one of the day. In the recent minutes, the FOMC still took a cautious approach and removed the statement related to downside global risks. We could see the committee taking a more hawkish approach in light of recent US macro figures, which could boost the USD and send stock markets on the offer.
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